One OpenText: E Pluribus Unum, Enterprise Software Style

It’s becoming the latest trend in enterprise software company evolution. After years of merger and acquisition, in which dozens of products and thousands of customers were dumped helter-skelter into a single corporate bucket, yet another agglomeration of disparate products, services, and technologies is trying to rationalize its offerings.

This time the company is OpenText, and the rationalized product set is code-named Red Oxygen,  a collection of five suites of functionality that span search, analytics, archiving, publishing and presentment, social collaboration, process management, integration, content management, and a development and deployment platform. Though the product set is vast, the goal is simple: rationalize a massive collection of products, strategies, and market acquired over its 30-plus years of existence.

In pulling a disparate set of over 100 products under a single umbrella, OpenText is showcasing the ambitions of its CEO, Mark Barrenechea, to avoid being road-kill in the too big to succeed club. In this regard, OpenText is following in the footsteps of companies like Microsoft and Infor, both of which have woken up from a binge of acquisitions and poorly integrated business and product strategies and realized that leveraging the sum of the parts requires more than just a single corporate logo.

From the looks of what OpenText presented at its recent Enterprise World conference, Red Oxygen is just what the company needs – a tangible strategy, and a new platform, for helping customers innovate around the increasingly important domain of content, big data, and business process. At face value this makes a lot of sense – content is at the heart of pretty much every major business transformation I’ve witnessed or worked on, and the interrelationship between content and business process is fundamentally what has to be improved in order for processes to improve.

While OpenText has a lot of ground to cover between its Red Oxygen strategy and execution, the foundation has clearly been laid for re-imagining a compelling reason for enterprises to work with a unified OpenText.  

There are three reasons why this strategic rationalization is essential for a company, like OpenText, with dozens of acquisitions under its belt: existing customers need it, prospective customers need it, and an often overwhelmed and outgunned sales force needs it.

For existing customers, a unified product strategy – as opposed to the smorgasbord of products that in many companies results from an often investor-friendly and customer-hostile acquisition strategy – gives customers a strategic vision and roadmap for the products they’ve invested in. Many companies became customers of OpenText through acquisition, and they need to know that the single product they bought can lead them to a promised land of other products, and innovation and value, etc. etc.

Of course, the trick is to make sure that the inevitable bad news that some products will be orphaned or simply rationalized out of existence is countered with some really good news about the new strategy and products that will replace them.  Problematic for some customers, but essential for the vendor going forward.  

For prospects, the rationalized strategy is usually about sloughing off the lingering market-dinosaur status that often is the result of an investor-friendly acquisition strategy that’s more about creating a fat maintenance revenue stream than product innovation.  This is clearly part of the rationale behind Red Oxygen, as it was the rationale behind Infor’s Infor 10x strategy and the Fusion software and middleware strategy that Oracle – the king of investor-driven acquirers – tried and failed to use to rationalize its software binge.

(Over in Redmond, Microsoft has been accused of looking like it is on the road to extinction, but not by running up a massive maintenance stream based on a hodge-podge of older products. Though you could argue that its desktop and office productivity monopolies were definitely making Microsoft as fat and happy  as any maintenance-revenue rollup, what was really happening was that the company had let its different operating units function so autonomously that they were indifferent to the need to cross-sell Microsoft products. While the cause was different the effect was similar: existing and prospective customers may have bought the products, but they weren’t  being sold a pan-Microsoft strategy, and a massive up-sell and cross-sell opportunity was squandered. In theory, this is what the company’s One Microsoft is intended to solve.)

Like Microsoft, Infor pre-Infor 10x, and like Oracle today despite Fusion, OpenText needed a shot in the arm that could leapfrog its reputation as an old guard market laggard  doomed to obsolescence in the face of an aggressive new set of competitors.  Reputations like these are often unfairly earned – there is a mountain of evidence that customers have continued to spectacularly innovate using OpenText’s existing portfolio, especially but not exclusively in the SAP market for which OpenText is SAP’s top OEM partner . But there’s nothing like having a loud-mouthed startup, such as Box, trying to steal your market and paint you into a strategic corner to force a little strategic change.

Finally, there’s the problem of sales execution – that great black hole where all good marketing ideas go to die. Companies that grow through rapid acquisition usually find themselves at a point where there are just too many wildly different and often over-lapping products in the portfolio to sell. In frustration the field sales team simply rolls up its sleeves and goes tactical, selling only the point solutions they’re most familiar with and foregoing any attempt to sell a strategic product set or vision. This works well-enough as long as the customers don’t want vision and the competition isn’t doing a halfway decent job of selling a vision of their own. But once the competitors start looking visionary, and the customers start thinking that a little vision might be good for them as well, then a field sales force that can only sell tactically is going to be drag its company down the road of mediocrity.

This triple threat is clearly what Barrenechea is trying to avoid with Red Oxygen, and judging from the reaction at Enterprise World there’s a decent chance he will succeed. While there were definitely customers I spoke with who voiced concerns about whether their favorite product or capability might be lost in the shuffle, there was clearly a sense of relief that OpenText was starting to show some moxie. How well moxie translates to market and mind share will take some time to discern.

There’s one important caveat for OpenText and it’s fellow acquirers-cum-strategic visionaries. The pan-enterprise story is a good one, and a necessary one for vendor and enterprise alike. But it’s hard to sell at a time when more and more influence is being divested to the line of business buyer who unfortunately doesn’t care as much as he or she should about how LOB buying decisions fit into a broader corporate strategy. This problem only gets worse when you add a platform to the mix, as Barrenechea  has done with Red Oxygen. Take your vitamins and eat your vegetables … always easier said than done.

In the end, OpenText really doesn’t have a choice – no more than any other serial acquirer in today’s fast-moving technology market has a choice. And as for the ambitiousness of its plan – it’s definitely better to err on the side of too much vision than not enough. The vision is a good one, now we’ll have to see if the customers agree.

Too Big to Fail? How about Too Big to Succeed?

Achieving economies of scale is one of the axioms of modern business, a driver for mergers and acquisitions across all industries. This relatively simple concept helped drive a huge swath of industrial companies to impressive degrees of success: in many many cases, buying at massive scale, building at massive scale, and delivering at massive scale has helped drive up revenues and profits, improve market share and share price, and improve share of wallet in accounts large and small.

But does this drive to bulk up always work as well as its proponents – many of whom are all too often conflicted by the huge fees they and their companies stand to gain in the M&A business – would have us believe? And what about the customers supposedly at the center of these transactions – is there anything in it for them?

I think the answer, particularly in our tech-driven service economy, is increasing no. We’ve seen a side of this in the “too big to fail” phenomenon that was the main side show to the current recession: financial institutions whose very size made them too big to just cast them off into the depths of an economic Tartarus. And so as a society and global economy we bailed out these miscreants and clucked our tongues at the notion that we had no choice, that they were just too big to fail.

But isn’t the fact that they needed bailing out really highlight the notion that these institutions were indeed too big to succeed? Too big to move quickly, too big to think smart, too big to act responsibly, too big to provide great customer service, and too big to get out of their own way?

I’ve reflected on this problem of too big to succeed as I have reviewed the trials and tribulations of a number of tech companies that have become or are at risk of joining this misbegotten club. These are companies that have been buying up customers, products, and market share with increasing frequency and avariciousness. In many cases they have made their owners wealthy and their shareholders happy, but all too often they have failed to deliver on the promises that were meant to justify a growth-at-all-costs strategy. What looks good on paper – bigger is better – is looking more and more to be as healthy for tech companies as an IV drip of anabolic steroids is for an athlete . Good for the seasonal batting average, but increasingly bad for the long term.

I spent some time doing strategy work for Hewlett-Packard during the brief reign of Leo Apotheker, and saw firsthand the effect of too big to succeed. My favorite among many examples was the next generation router that I was shown precisely because it couldn’t be brought to market by HP as it was organized in the Mark Hurd era: the different product, manufacturing, sales, and marketing groups that would be needed to work harmoniously together to bring this prototype to market simply had no mechanisms or processes that would allow them to actually do so, regardless of the potential for value.

This lacuna was in force across the company: well-established product lines, like printers, servers, and PCs all had their own sales forces, and their own lead gen activities. There was simply no way for a customer to strike a pan-HP deal, or for HP to combine its sales efforts and leverage all its product lines in the kind of synergistic sale, that if done right, could have significantly improved a half-dozen financial and customer satisfaction KPIs.

In other words, while at the time HP was a $50 stock beloved by its investors, riding on a succession of big ticket acquisitions, inside the company was a rotting core that would eventually begin to ooze out through the edges in bad quarter after bad quarter. The company that a succession of CEOs, from Carly Fiorina to Mark Hurd, had bulked up by buying the likes of DEC, Compaq, EDS, Vertica, Palm (and Autonomy, during Apotheker’s time) had become too big to succeed. And, as far as I can tell, remains so today.

Some of my impressions on the too big to succeed concept have been gleaned from my experience as a consumer. AT& T is a good case in point. They sell a wide range of services that they simply cannot seem to coordinate effectively. My experience last summer moving my home and office was a case study in too big to succeed: AT&T sales and marketing pumped the hell out of their Uverse services, but the technical side of the company couldn’t fulfill on the promise. Instead of turning on new services they shut off existing services, they dispatched technicians without a clue what they supposed to be doing on site, and those poor schmucks frequently made things worse: within the space of two visits from AT&T’s technicians my office mate’s internet account was taken down and the telephone service to my new landlady was fried, my office internet and voice couldn’t be connected, and our home phone number rang into the great digital void, disconnected from our new home. For the better part of a week.

More importantly, all of the above took place after I contacted AT&T’s senior executive vice president for Home Solutions about my problems executing our move, and was assigned not one but two special purpose managers. These two gentlemen are part of a full time team in the office of the President created to sort out the intractable problems that, for the lucky few who know how, are able to escape the labyrinth of the AT&T disservice center and find their way to the exec who is actually responsible for AT&T’s customer sat.

But finding my two new BFFs was more of a Pyrrhic victory than a genuine triumph: Even with one of these top guns helping out, and identifying himself to his colleagues as a way to make sure they understood the importance of satisfying this customer, AT&T simply couldn’t execute one of its most basic customer-centric business processes: move and upgrade service to an existing account. Too bleeping big to succeed indeed. Two months later, they’re still getting it wrong.

I’ve had similar experiences with Chase, egregious enough to cancel my Chase card and vow never to do business with Jamie Diamond again. I think some of the post-hoc analysis about Chase’s role in the financial crisis would put them squarely in the too big to succeed category. There’s also United Airlines, and Sprint to add to the list, and more where that came from.

Not every company is willing to march, lemming-like, off the cliff without a fight. I think it’s safe to say that Steve Ballmer’s reorg at Microsoft is predicated precisely on the desire not to become road kill on the too-big-to-succeed highway. I could literally write a book (or at least a post) about how many times I’ve personally witnessed one part of Microsoft proceeding in willful ignorance of an opportunity in another part of Microsoft to sell a better product, fill a strategic hole in an existing product, provide strategic justification for why two products should go to market together, or provide competitive cover for another product against a larger, outside competitor.

One Microsoft
is Ballmer’s answer to that mess, but the strategy is still in its infancy, Microsoft is still standing on the precipice of too big to succeed, and the company just got bigger by executing a $7.5 billion deal for Nokia’s phone business. But there’s solid signs that Microsoft is trying to buck its destiny, and, from what I can see and hear, it might just succeed.

GE is another company that has impressed me with its foresight. One of the major reasons the company has built GE Software and is pushing a new platform for the industrial internet is to rationalize its different and often siloed industrial lines of businesses and make sure that GE and its customers can leverage the massive opportunity represented by sensor-based data analysis and operations optimization. It’s impressive that one of the most success industrial companies in the world realized that it needed to make sure that the structure and business model that got it to where it is today didn’t stop it from succeeding in the next big opportunity.

Other companies could do with a similar hard look in the mirror. Oracle is definitely one of them: anyone visiting Oracle OpenWorld this year would have seen a company teetering under the sheer bulk of the steroid-drip of acquisitions it has made over the years. The Sun acquisition has proven to be too high a price to pay to keep Java away from IBM, and the engineered systems strategy is clearly an attempt to justify a hardware strategy whose time has come and gone in the age of cloud computing and low-cost, high-performance, standard hardware.

In this light the company’s enterprise software strategy is the main victim of Oracle’s too-big-to-succeed tendencies: instead of leading the innovation charge, enterprise software at Oracle is more of an enabler of the company’s doomed hardware strategy than a crucible of new ideas and new capabilities. And as long as Oracle’s enterprise software is forced to march to the company’s hardware and database drum, success in enterprise software will be harder and harder to guarantee.

I have to add SAP to the mix as well as a potential member of the club. While not as acquisitive as Oracle or Microsoft, SAP has also bulked up its product and customer base, and there’s a genuine risk that, at least when it comes to the SAP field sales team, it has become increasingly difficult for anyone outside to top echelons of the company to articulate the full value of SAP’s vast portfolio to customers and prospects. What is saving SAP for now is a mono-maniacal focus on HANA, mostly because HANA is a concept and product line that can be relatively easily distilled for the field to sell. Just don’t ask them to explain the full breadth of what SAP can bring to the table, there’s too much in the kit for them to handle. This should serve as an early warning sign to SAP management that they’re at risk for joining the too big to succeed club.

….

I think it’s time to admit that economies of scale work well in industrial companies with industrial processes, but sheer size is no advantage in a service economy. In a service economy, or any economy that depends on getting people to come together in order to provide innovative services to customers, doing more with less – the mantra of the economies of scale mavens – simply doesn’t work.

AT&T thinks it can grow it service offerings without significantly altering its service delivery and support, and it pays the price for having products and services its field technicians and help desk personnel don’t understand and can’t support. Chase, and let’s throw Citi under the same bus as well, thinks that it can continue to fail in coordinating its services across its multiple product lines, and provide completely sub-standard customer service along the way. As long as it makes its numbers, or at least appears to be.

Oracle thinks that it just needs to keep offering more products while collecting huge maintenance revenues, regardless of whether the products work together or are providing real innovation to its customers. And HP – I simply don’t know what Meg Whitman thinks she’s going to do, but it’s clear that recapturing the mantle of innovation and leadership in Silicon Valley isn’t going to happen given the current strategy.

Of course, success and failure are relatively ambiguous terms, so it’s easy to say that AT&T, HP, Oracle, Chase, and Citi are all successful companies, depending on how you measure them. But if the measure of success is the ability to deliver value, innovation and great customer service – simultaneously and at scale – then I would argue that the companies above are members in good standing of the too big to succeed club. And they’re not the only ones.

Can this problem be solved? I think, I hope, that the Darwinian forces that are embodied in another great market maxim –the customer is always right — will help tilt M&A fever in the right direction: towards genuine customer value, not just shareholder value or the lip service that spawns such laughable corporate slogans as We’re a financially strong company with a proven commitment to our customers, community and economy (Chase), Bringing it all together for our customers (AT&T), or Oracle’s Less complexity, more innovation – which basically reads like the headline of an analyst report on the requirements for getting Oracle out of the morass it has created in the race to join the club.

(There’s also Citi’s rather baffling slogan: Informed by the past and inspired by the future. You almost wonder if they’re trying to be contrite or have simply failed to see the irony in calling out the need to be informed by their checkered past. Or maybe they used the same branding company that came up with Oracle’s slogan.)

In the end, the real question we as customers, consumers, and tech executives should ask ourselves is whether value, innovation and great customer service are a realistic goal for a merger or acquisition, or if these terms are used as a smoke screen to mask a financial transaction that benefits everyone but the customer.
If my wish that Darwinian karma will eventually wreak revenge on the over-acquisitive, then perhaps that eventual karmic justice will become part of the equation in evaluating the long-term prospects of a merger or acquisition. Because if the result of customer neglect is the destruction of equity through customer flight, then maybe, just maybe one day more attention will be paid to what’s in it for the customers. And then posts like this will seem to be a quaint example of a far-gone past, like an Upton Sinclair expose or a Thomas Nast cartoon.

You gotta dream…

Dynamic Microsoft: From Ubiquitous in the Enterprise to Truly Strategic

Last summer’s reorganization at Microsoft didn’t look good for Microsoft Dynamics, at least on paper. The enterprise software group was barely mentioned in outgoing CEO Steve Ballmer’s letter to his staff, and the position of Dynamics head Kirill Tatarinov looked uncomfortably tenuous in a reorg that seemed to all but shout that Dynamics would be sold off to the highest bidder at the first opportunity.

Before I wrote this post, I had a chance to talk to Kirill, who told me I was 180 degrees off the mark. At last week’s Dynamics Analyst summit, Kirill and his team proved their case. And then some.

The “then some” came in the form of addresses from two of the top lieutenants in Ballmer’s reorg, Tami Reller, the uber-vp of marketing at Microsoft, and Satya Nadella, the uber-vp of cloud and infrastructure. In addition to their commentary and perspective, these very senior execs, by their very presence, along with that of Kirill himself, highlighted the high profile position that Dynamics now holds in the new devices and services-focused Microsoft.

And in case even further proof is needed that Dynamics is now in the cat-bird’s seat, it’s worth noting that Satya was head of Dynamics from for a few months in 2006 and 2007, and Tami, who came to Microsoft from the acquisition of Great Plains in 2001, served as interim head of Dynamics when Satya moved over to head up Microsoft’s Search efforts. And, while you’re filling out your scorecard, it’s also worth noting that the incoming devices guy, Stephen Elop, was also the head of Dynamics from 2008 to 2010.

So, Dynamics isn’t just front and center in the new Microsoft, a stint at running Dynamics can be seen as a key resume builder in the quest for the upper echelons at Microsoft. Who would have guessed?

Of course, there’s a very good reason for this, much of which has to do with the One Microsoft strategy and the role that Dynamics plays in realizing that strategy. That role boils down to this: Microsoft’s products are ubiquitous in the enterprise, and by extension in much of the consumer world too.

But being ubiquitous isn’t the same as being strategic. In too many ways, Microsoft’s traditional core products, Windows, Office, Sharepoint, and SQL Server, its new products like Azure, Bing, and even Xbox, and recent acquisitions like Yammer and Skype, are competing in markets that are already commoditized or rapidly commoditizing.

To be fair, Microsoft has a lot of great innovations around these core products that are intended to help them rise above the commodity layer and allow Microsoft to be highly differentiated against its competitors: A touch-based user experience that can span the mobile and desktop worlds, Xbox Kinect, which is poised to revolutionize the user experience in key parts of the enterprise, machine learning-based search, in-memory analytics, a cloud infrastructure, a cloud-based data mart, among many others.

So there’s no shortage of innovation, but individually, as standalone products, these innovations aren’t innovative enough to truly change the game for Microsoft, not at the scale that Microsoft needs in order to thrive. That’s where Dynamics comes in.

As I wrote here, Microsoft Dynamics has the ability to showcase the full depth and breadth of the product set at Microsoft, and, in particular, help reify an innovative “sum of the parts” strategy that is needed in order to emphasize the value underlying the new One Microsoft corporate vision. Dynamics in the enterprise is precisely the calling card Microsoft needs in order to tell an innovation story that can raise its enterprise presence from merely ubiquitous to genuinely strategic.

The parts are also innovating, particularly in the core of its two flagship products, AX and Dynamics CRM: a recent announcement of with InsideView will enhance CRM with context-specific information – provided in the CRM UX by InsideView – about the people and businesses that a rep or customer service person are in contact with. AX is getting improved warehouse and transportation management, new time and expense management capabilities, and additional project management features, among others.

And one of the geekier, but extremely important features coming to AX is an Azure-based application life-cycle management toolset that can be used to implement and manage cloud and on-premise AX systems. This is more important that it may look: ALM, particularly for on-premise, is usually either overly complex and expensive to implement and use (cf. SAP’s Solution Manager), or largely a limited-functionality afterthought (cf. Oracle). Giving on-premise customers, in particular, access to a fully-featured ALM tool running in the cloud solves a lot of problems for these customers and gives AX a competitive edge, particularly in an SAP market suffering from Solution Manager fatigue.

But it’s really the sum of the parts that makes the most sense in terms of moving Microsoft forward, and that means that whomever replaces Steve Ballmer will need to emphasize how Dynamics can define the new Microsoft. It’s getting easy all the time to imagine a confluence of strategic innovation and ubiquitous services that can redefine Microsoft’s position in the modern enterprise.
The possible scenarios are not that far-fetched: an integrated enterprise where warehouse workers use Windows embedded devices in the warehouse, shop floor workers use gesture-based Kinect devices to manage industrial equipment or clean room processes, and sales and service workers use Windows mobile devices in the field, with everything rolling up to AX and CRM in the front office and Window POS systems in the retail system.

Meanwhile, beneath that strategic layer are the infrastructure pieces that, while relatively ubiquitous today, would become more ubiquitous, and frankly, more valuable, by hitching their stars to Microsoft’s new strategic positioning. The above scenario needs a cloud that supports IaaS and PaaS, content management a la Sharepoint, lots of Windows and SQL Server functionality, desktop functionality a la Office 365, etc. etc.

Of course, Microsoft can sell these and other services as a bundle without Dynamics, but then they’ll be hard pressed to do more than maintain a ubiquity that’s won’t translate into the kind of growth that Microsoft’s investors – and partners – are looking for.

The only way this could be derailed is if the wrong person comes in to take over Ballmer’s seat. Despite all the criticism that has been levied against him over the years, Ballmer’s focus on One Microsoft is the right path, and the only one that will allow the company to realize its full potential, or at least have a fighting chance of doing so.

De-emphasizing the strategic position of enterprise software – something I could imagine some CEO-wannabe doing, one who focuses on appeasing an investment community that has never really understood enterprise software – would turn Microsoft into the next Hewlett-Packard: A failed tech giant that became too big to succeed, doomed to slowly smother under the weight of its own market and product inertia.

It doesn’t have to end that way, and, as things look today with Dynamics, it won’t. So far, so good.

Infor Who? Name Recognition is the Name of the Game

The renaissance of Infor continues apace, with more customers, more partners, more products, more cloud functionality, more go-lives. Pretty much by every measure, the company CEO Charles Phillips calls “the world’s largest startup” continues to improve its market profile across the board.

With one important exception that in the end will become the ultimate measure of Phillips’ success: name recognition.

With a well-recognized brand, Infor could become one of the great turnaround stories of enterprise software. And without one, the dream of being a viable and market-leading enterprise software vendor with the critical mass of an SAP, Oracle, or a Microsoft remains unattainable.

It’s not that Phillips doesn’t get it. In the first five minutes of his keynote address at the recent Infor Americas Partner Summit, Phillips made it clear he knows what’s at stake. New product strategies, partner strategies, and technology strategies are all are in place or in process, but all that is not enough to get the company or its partners on a prospect’s shortlist, Phillips told his audience: “Our biggest challenge is to get into the meeting.”

Give the man credit for knowing his business well. This issue seeped into every partner meeting I had at the summit, as well as numerous conversations I’ve had in the last year across the industry. And the problem isn’t just a matter of not having heard of Infor: I spoke recently with an industry exec looking to make a career move, and when I mentioned Infor I could hear him wince over the phone. The pre-Phillips Infor was more of a private-equity shark’s nest than a great place to grow a career, much less grow great products and markets. That Infor was a little too well-known for all the wrong reasons, and Phillips and his team have to do double-duty to re-build the brand while overcoming a less than exemplary past.

That past, and the relative lack of marketing budget for promoting the new Infor so far, has left partners in a bit of bind. How to drive prospects to let them into a meeting hasn’t gotten easier, even if the message that can be delivered at these meetings is dramatically different. So a little creative marketing has been necessary. One partner I spoke with has been targeting Salesforce.com customers: Infor has an alliance with Salesforce.com, productized under the name of Inforce, that lets partners at least “get into the meeting,” drafting on Salesforce.com’s name recognition.

And name recognition is everything. Never mind the irony that Infor and Salesforce.com brought in roughly the same amount of revenue last year ($3+ billion), and that of the two Infor is both the more profitable and possibly the faster-growing. Or the fact that Marc Benioff may have better name recognition, but Charles Phillips has better overall credibility. Or the fact that Inforce has significantly enhanced Salesforce.com’s CRM functionality to make it more functional in a manufacturing environment than off-the-cloud-rack Salesforce.com. The race is not always to the swiftest, in case you hadn’t heard.

I asked Phillips about the problem, and he promised that the company would do more events, more face-to-face meetings, and otherwise get the word out more aggressively than it has in the past. Infor has started an airport advertising campaign, and more is in the works. I personally think that Phillips and the rest of his management team needs to become more visible as well: He’s a good speaker, has a sterling resume with a pretty interesting background (ex-Marine Corps captain, a techy and a lawyer, a former top notch financial analyst, ex-Oracle co-CEO, jazz lover, the rare African-American executive in an otherwise predominantly lily-white industry). And his team – presidents Stephan Scholl and Duncan Angove, and COO Pam Murphy – have a co-leadership model that should be fodder for some great brand-building as well.

I think focusing on renewing the Infor brand will also help set the stage for the other big challenge: getting customers who have lingered for too long on older versions of Infor products to stick with Infor instead of moving to a competitor. One of the partners I met with this week told me his most optimistic hope was that 50 percent of these old die-hards could be convinced to stay the course. Pretty much everyone else I talked to thought that was a realistic goal, but still quite aspirational considering the state of Infor and the stasis that has limited these customers’ thinking for some time.
But if the Infor brand can become identified with the concepts that sell modern, innovative enterprise software, instead of remaining the locked in the past, that 50 percent might be more than attainable.

Customers tempted to move away from Infor have an increasingly complicated set of choices. SAP is definitely there to be reckoned with, but Oracle really isn’t playing in the mid-market where Infor is strong. Microsoft Dynamics does play in this market, but I fear that sorting through the ramifications of the recent Microsoft reorg may cause some execution problems at Dynamics. Sage and Epicor are definitely players as well, but neither can command top tier status in the market, nor have either of them been able thus far to be identified as members of the leading-edge innovation club.

In the end, the brand recognition issue represents Phillips’, and Infor’s, next great opportunity. It can be done, but it takes time and budget. SAP started down this path years ago, and as of this year its overall brand awareness is significantly higher, but the company still has issues ensuring that its brand identity – the “what does SAP do” question – is as well-established as its brand recognition – the “who is SAP“ question.

A similar problem besets Infor, though it’s clear that the company neither has the time nor the budget to engage in a multi-year, multi-billion dollar branding effort. So far Phillips has made “doing more with less” both a virtue and a competitive advantage. We’ll see if he can do the same on the way to making Infor the household brand it deserves to be.

The Changes at SAP — What Matters and What Doesn’t

SAP co-CEO Jim Hagemann-Snabe has resigned, and is likely to move up to the Supervisory Board. President and corporate officer Sanjay Poonen has also resigned, off to parts unknown, and SuccessFactors founder Lars Dalgaard resigned June 1. Ariba CEO Bob Calderoni has taken over as SAP’s cloud leader. And Vishal Sikka recently added leadership of all of SAP’s development efforts to his expanding portfolio.

Lots of changes at SAP, but what does it all mean? In a nutshell, less than it may appear. Solo-CEO Bill McDermott still has to execute on sales, especially given the less-than-stellar quarter, and Calderoni in particular still has to help cloud sales expand, as it was the cloud that rained on SAP’s recent quarter the most. Considering Sikka’s HANA is the foundation and the leading edge of all of SAP’s product efforts, his move to head up all of development represents more of an acknowledgement of the status quo than anything particularly new. And with Snabe, the “other” technology guy out of the picture, Sikka gets to have sole ownership of this key portfolio, which may simplify things across the company.

Poonen’s departure does put into question the fate of the company’s mobile strategy, which was given to him as his next challenge following his success at driving SAP into the upper echelons of the BI/Analytics market. I wrote earlier in the year about the “end of mobile”, which got me taken to the woodshed, Poonen-style (main weapon of coercion: lunch). Mobile revenues didn’t make the highlight reel from last quarter, and my guess is that mobile is going to be a major issue in coming months as the company tries to boost revenue from the mobile assets it acquired over the last two years.

Also needing some attention will be the Asia-PAC markets, which definitely didn’t perform up to expectations in the last quarter and are clearly slated for something new. I would expect that McDermott will be making some personnel changes in that part of the business soon– it’s too important to not shore up with some kind of personnel shift, if for no other reason than to make a statement that getting this market back on track is an important priority.

That’s business as usual, but there’s a lot more going on at SAP that will have a greater impact than the musical chairs at the top. I had a briefing recently about SAP’s Connected Car strategy, which includes some fascinating new business models for generating revenue — and consumer customers — for SAP. Selling software and services that change how cars interact with their drivers — think of the car as a commerce platform, and not just a transportation machine — could have a major impact on SAP’s revenues and overall business cloud moving forward. Ariba is another nascent opportunity, and the company has yet to really leverage its opportunity in synergy with SAP. Using Ariba to drive new business through a 21st century version of the dotcom era net markets concept has huge upside potential for SAP, and Calderoni and company have only just begun to get that effort started.

Suite on HANA, everything on HANA: that’s also just getting started, with a huge potential for net new revenue on the horizon. The Rapid Deployment Solution implementation model is beginning to have a huge impact on customer costs and innovation strategies, and even good old Solution Manager is going to see a new purpose, and a much more cost-effective implementation lifecycle, as part of the cloud push.

There’s more, and that’s the point. SAP’s management structure is both broad and deep, and while the departure of a co-CEO is newsworthy, this departure means less than it might seem on face value. Don’t get me wrong, Snabe is going to be missed, as a person and a business leader — though it’s going to take 10 months for that to happen anyway, so we’ll get to play Danish swan songs for while. More importantly, there are changes that will make a difference at SAP that will be felt for a much longer time than the impact of Snabe’s resignation, and that’s what really matters to SAP, it’s customers, and its partners. I personally wish Jim all the very best, but I’ll not mourn his departure. There’s just too much else going on.

The Microsoft Reorg and Microsoft Dynamics: Odd Man Out or Shining Example?

Three words were missing from Steve Ballmer’s memo to his employees last week that, on face value, looked ominous for Microsoft Dynamics. The first two words were business process, and the third was industry (okay, he said the word once, but in reference to Microsoft’s industry sector). And as I read and re-read the memo, the void seemed to only grow: services and devices without a focus on packaged software (which Ballmer did mention, only to say that there wasn’t a future in it), business processes, or industries looked like the setup to a sale of the division that specializes in these three concepts.

The truth, luckily for Dynamics and perhaps unluckily for a few private equity-backed buyers I know of, is that enterprise software has a future inside Microsoft. And while Ballmer said that Dynamics still needs a “special focus” – which sounds a little like damning with faint praise – the concept of Dynamics acting as the “unifying fabric” of Microsoft remains in place.

So rather than worry about whether Dynamics will be jettisoned as part of a new focus on devices and services, the question about Dynamics’ future is really whether it will get lost in the enormity of the changes that are part of a wholesale, and desperately needed, reorganization of Microsoft.

Part of what should help Dynamics’ cause is that two of the executives who surfaced as part of the senior leadership in the reorg have solid backgrounds with Dynamics. Satya Nadella, who now heads the cloud and enterprise engineering group, spent a year running Dynamics in 2006-2007, and Tami Reller, the new EVP of marketing, came to Microsoft when Great Plains, a flagship Dynamics product, was acquired in 2001. In addition, the fact that key members of the Dynamics team, which is still run by Kirill Tatarinov, will have dotted line responsibility to Satya and Tami will hopefully continue to solidify the links between Dynamics and the rest of the company.

But ensuring that those links translate into face time and development and marketing budget for Dynamics may take more than having a track record with three of Ballmer’s direct reports (Kirill included) and some dotted line reporting. The irony of the “special focus” that Ballmer mentioned for Dynamics is that, as far I can see, Dynamics does a better job fulfilling its mandate to be a leader in its core market than some other, bigger-profiled divisions are doing fulfilling their mandates to lead in their respective markets.

While Dynamics may need “special focus”, many of the core businesses at Microsoft need much, much more. Here’s a quick list:

Windows 8 phone: as I have noted before, Windows 8 phone is so dead in the water that no big box retailer in the Northern California runs ads for Windows phones. Some telcos just don’t even bother carrying the phone: My carrier, Sprint, is finally coming out this summer with two low-end Windows 8 phones, which I predict will be largely DOA. Meanwhile, Windows phone is internally fragmented in Microsoft, and as I wrote here, partners and customers have recently had trouble getting support for embedded Windows phone development efforts, among other problems. Result – Windows 8 has pretty much zero penetration in the phone market this side of Redmond.

Lync: as I also have noted before, Lync is an embarrassment. It’s as if Microsoft decided that Google’s bad habit of releasing buggy beta software was a virtue to emulate, and so decided to get the latest versions of Lync out in the market well before they are ready. I recently conducted two workshops for a client that has made a corporate switch to Lync, and in both cases we simply couldn’t get Lync to work. In all I have tried to use Lync for a number of different purposes, including joining in on a recent analyst call run by the Lync team during which Lync crashed and burned, and have successfully conducted one and only one call using Lync in over a month. Result – a living, breathing advertisement for WebEx and Go-to-Meeting.

Xbox video: I wrote about this mess last year, and it’s still a mess. The latest: Xbox forgot that browsing titles is a good way to find interesting movies. Browse the Windows 8 Xbox store using the categories in the UI and you find, frankly, a lot of second tier crap masquerading as something someone would spend good money watching. You’d think that was all Xbox video has to offer. But as long as you know the name of a movie or movie star you are interested in, you can search and find an impressive number of great movies. But name by name search is the only way. For a company that has put a lot of effort into Bing and the search market, Microsoft has a very 20th century version of search running in the Xbox video store. Result – Netflix, iTunes and Amazon Prime can all sleep well at night.

Windows 8: As I wrote here, the confusion created by not differentiating the touch experience enough has made for a much bigger mess than Microsoft should be in regarding Windows 8. Apple has no touch screen laptops, and when I show mine to Mac users you can see their eyes light up. But instead of leveraging this opportunity, the best Microsoft can say to date is that Windows 8 is beating Vista’s uptake in the market, which is kind of like saying Windows 8 phone has surpassed Palm OS in the phone market. BFD. Result – more time for Apple to come out with a unified OS strategy, while a lot of corporate upgrades go from Windows XP to Windows 7 instead of Windows 8.

There are more, but I’ll leave it at that. The point is, just planning and executing a reorg sucks a huge amount of executive cycles, and then there’s the execution side. Considering how big the reorg is and how numerous the problems, one has to wonder how much time even execs like Satya and Tami will have to think about Dynamics. Satya’s recent keynote at Microsoft’s Worldwide Partner Conference had a demo of Dynamics CRM, and he managed to mention it 10 times, primarily in the context of CRM. Tami never said Dynamics once in her keynote. Ballmer also mentioned Dynamics in his WPC keynote, but it was largely in the context of a “last but not least” mention that unfortunately really was last and least. Better than nothing, I guess.

As I said at the beginning, I first thought that the “significant opportunity” Ballmer referred to with respect to Dynamics involved a sale, but I have been assured by my contacts inside Dynamics that, quite to the contrary, Dynamics is alive and well and poised to thrive inside the new Microsoft. I believe them. For now.

But the proof will be in the pudding: we’ll know if Microsoft really means to leverage this “significant opportunity” when the “unifying fabric” concept starts to get much greater play with the likes of Ballmer, Reller, and Nadella, and that also means some discussion about the things that Dynamics is good at, like business processes and a focus on industries.

There’s a place for both in a services and devices company – services that don’t directly support or enable business processes or are tailored for specific industry requirements are relatively low in strategic value to customers, and therefore won’t be as valuable to the new Microsoft as well. And devices – tablets, hybrid PCs, Xbox Kinect, and even Windows phones – can have their greatest strategic value when they are enabling complex business processes to be undertaken in more automated and effective ways.

Ironically, the sickness that Ballmer is trying to root out with his reorg is so vast and pervasive that the fact that Dynamics is doing relatively well means it may not get the attention it deserves. With so much to change at Microsoft, it may come to be that Dynamics changes the least of all.

Google Envy at The NSA

I have to admit I’ve been chuckling at the degree of shock and dismay at the revelation that the NSA, in the name of security and anti-terrorism, has been monitoring all manner of cell phone and web-based electronic data. And going to a lot of trouble to do so, using court orders and a lot of complex technology to get ahold of and process the information our government needs to keep us safe from terrorism.

Meanwhile, Google, in the name of Google’s profit margin and share price, has been doing the same or better without anywhere near the same level of shock and dismay. In fact, Google gets as much or more information than the NSA out of the Internet, cell phones, and other data sources from a very willing population, which gives it up to Google apparently without hesitation or regret. And as Google controls the data model behind this information flow, instead of having to integrate a vast array of disparate data Google engineers have a relatively easy time building the analytical models they need to further their business goals.

Maybe the NSA just has the wrong approach, or business model, or both.

Because it’s clear that if you sign up to the Google experience you’ve effectively handed a public company an information stream that would make the NSA – and their counterparts around the world – drool with envy. Right now we don’t really know the extent of the information being gathered by the NSA, but it’s clear they’d have to work hard to find a single source of information as effective or a user population as willing to hand over their digital lives as Google’s.

Maybe instead of sneaking around and bothering with clandestine court orders, the NSA and Uncle Sam should adopt Google’s methods. It’s really very simple: Google’s business model is based on getting you to use their tools and services for free in exchange for giving Uncle Eric (and Uncle Larry and Uncle Sergey) as much information about your actions and interactions as possible. In a perfect Google world your email, phone calls, messages, videos (those you make and those you watch), photos, music, news searches, banking transactions, purchases, location, voice, speech and facial characteristics, information sources, friends, social graph, and, with Google Glass, the contents of your visual field, are all captured and analyzed by Google. (And please forgive me if I left out some favorite Google service, there’s just so many and I’m only one blogger.)

Google then takes that information and uses it for…whatever it wants. That includes targeting you with more goods and services, as well as selling your information to advertisers who want to target you with their goods and services. There may be other things as well – for all we know they’re fighting terrorism and global warming with your data. But, short of a lawsuit or a Wikileaks-like leak, we’ll never know.

To me the difference between the super-secret NSA and the super-secretive public company called Google is that the NSA is chartered to monitor communications (outside the US, and not inside, according to critics of the executive order that has allowed it to gather Verizon’s data) in order to safeguard our country. I’m pretty much okay with that, the Boston Marathon bombing another reminder that there’s a they out there who really are trying to get us. And while the NSA operates under a veil of secrecy that is sometimes a little too secret, there are oversight committees in Congress and the Executive branch that give me some reassurance that its actions are taken in accordance with the law.

And there’s still the Fourth Estate – or what’s left of it, ever since Google started to aggregate content for free, capture a ton of online advertising, and kill the business models of most news organizations (but I digress) – that can pitch in like the U.K’s Guardian newspaper did last week and at least call out a situation where the NSA’s actions are worthy of further scrutiny.

Google has no such oversight, no particular legal constraints in the U.S. for its information gathering activities – though the more privacy-conscious European Union is hot on their case. And Google’s motives beyond profits aren’t nearly as clear – or potentially pure – as the NSA’s. In fact, from where I sit, the NSA ought to be massively jealous of what Google is able to do in the name of free enterprise, out in the open and with the blessing of both government and the people, while the poor NSA has to sneak around in the dark of night like a bunch of spooks begging for a little data in the name of national security.

Maybe the NSA should buy Google? Or maybe Uncle Eric has been hobnobbing recently with presidents, prime ministers, and dictators as part of a road trip to shop the idea that Google should acquire the NSA or France’s DCRI intelligence agency, or at least let them outsource their data gathering activities to Google.

In the end if you’re outraged by what the NSA is doing, you should be equally outraged at what Google is doing. And if you couldn’t less about either one, good for you. You’ve become the model citizen that Uncle Eric wants you to be, and, assuming you’re not in jail or on a do not fly list due to your information profile, you’re clearly not a terrorist either (though you might be a massively stupid one begging to be caught if you’re a terrorist and a consumer of Google’s services.)

Even so, we need to make sure that all us of understand where patriotism, privacy, and unbridled commercialism intersect, and what our choices are in terms of what happens with the digital signatures we’re leaving behind. I for one think the NSA may have a case for doing what it’s doing, I’m much less sure that we should be giving Google a pass as well.

Microsoft Needs an Enterprise Reboot Now

I don’t usually like to admit I was wrong, but my love affair with Microsoft’s Windows 8 strategy is over. While I still think the basic strategy is a sound one for the enterprise – a single code base for building touch-enabled apps that can live on phones, tablets, laptops, desktops, and anything else Windows 8 will run on – I’m a little tired of the lack of execution on key parts of the strategy.

As Windows 8 is a proxy for Microsoft as a whole, my shift on the operating system side is really about the company as whole. Here we are in mid-2013 and it’s clear: Microsoft either reboots its enterprise strategy and refocuses on breaking down the software barriers that have impeded Windows 8 (and frankly, pretty much the rest of the Microsoft software stack) from reaching its full potential, or the company will have effectively scroogled itself.

My understanding is that this imperative isn’t lost on Microsoft, and some sort of major organizational reboot is already underway. And like his peers, I’m guessing is that Steve Ballmer will follow the path that every software exec of his relative generation seems to be taking in the twilight years of their careers: hardware.

Freudian, Viagra-fueled analyses aside, it’s a phenomenon worth thinking about. The latest convert (following Larry Ellison’s disastrous Sun foray and Hasso Plattner’s promising HANA adventure) is SAS Institute, whose CEO, James Goodnight, has taken to pulling an Intel Sandy Bridge processor from his pocket (easy does it, Sigmund) during his keynotes to extol the virtues of modern hardware to his customers.

However smirky the thought, this isn’t as crazy, stupid, or metaphorically overdrawn as it may seem. Microsoft is already a hardware company, and it really just needs to do a better job making that component of its business an equal partner to the software and services side. And considering what Microsoft is trying to do with hardware, there’s a lot more to their potential than what Oracle has been trying to do, and a way better fit than what SAS is trying to do by pushing hardware to rooms full of BI/analytics customers.

Most importantly, it’s what hardware, as a general term, can do in combination with the software and services that Microsoft already sells or is planning to sell that makes this a potentially compelling direction for Microsoft to take. One of the best and most promising examples of this is Xbox Kinect – the potential that comes from adding voice, video, motion, and infrared to the available user interface technologies in the enterprise is one hell of an amazing idea. In case you didn’t see it, Microsoft just released an upgraded Xbox that includes a more industrial-strength Kinect system (though one that isn’t, yet, truly ruggedized for industrial use, but that’s coming too, so I understand). It’s also got Skype, a Windows 8 UX, a so-far-obscure connection to Azure, and a few other bells and whistles that make it so much more than just a gaming platform.

Even better, Kinect isn’t just a piece of hardware and a bunch of games trying to morph into an enterprise-ready user experience. Xbox is a portal into one of the worlds’ biggest online communities, 46 million strong and with a growth rate of 18 percent over last year. That’s a solid base for understanding the interplay between great hardware, services, and software and driving a new combo strategy into the enterprise.

Windows 8 is also part of Microsoft’s hardware promise, though it’s pretty obvious that Surface 1.0 was a bit of a flop. Floppy hardware notwithstanding, as I have written before, my experience using a Windows 8, touch-enabled laptop has convinced me that the touch/desktop hybrid is the future of enterprise productivity. Surface 1.0 was a mistake partly because the price point looks ridiculous when compared to some of the Windows 8 laptops now available, and more because the Windows 8 team confused itself and the market by pushing a worthy new OS into becoming a bi-polar standard-bearer for Microsoft’s own internal confusion: Windows 8 is way cool and full of potential on a touch-enabled machine, but using it on a non-touch enabled PC is like watching a Blue Ray movie on an old black and white TV.

What Kinect and Windows 8 touch have in common is the true foundation of the new Microsoft that I think Ballmer has to run with. With these two innovations Microsoft has invented new forms of interaction that define a unique interplay between hardware, software, and services that, at least today, can only be delivered by Microsoft. If the company could leverage that uniqueness into a touchstone (pun intended) for its increasingly impressive software and services play, I think the enterprise – as well as consumer – markets would pay attention.

So maybe hardware is the wrong word, maybe it’s user experiences. Certainly the way Windows 8 operates on phones and touch-enabled laptops is more about the UX than the hardware, and Kinect, if you haven’t tried it, is a pretty amazingly immersive experience for a pretty inexpensive piece of hardware. What is clear from my Win 8 experience is that the more I use the services that Microsoft is providing or supporting on my Windows 8 machines, the more that integration of hardware, software and services becomes greater than the sum of the parts. (Which is pretty much what the new Xbox announcement was really about too.)

Silos of Doom
This pan-Microsoft functionality goes to its ultimate denouement when you look at what Microsoft Dynamics is doing with the full stack of systems software, SaaS services, social, mobile, and, one day soon, Kinect as well. It’s an impressive model of a thoroughly modern hardware/software/services company, bar none.

But that’s the potential. The reality is that structural problems inside Microsoft still make summing the parts somewhere between hard and impossible. And this isn’t a onetime problem that can be solved by some sloganeering – it’s cultural, and these cultural deficiencies need to be torn up by the roots and thrown in the compost bin.

Microsoft’s infamous silos are the biggest candidate for a little mulching: My favorite example is the fact that once upon a time Windows phone users were told to use Google to synch their desktop Outlook contents to their phone, to the general ridicule and shock of Windows phone and Outlook customers. This bone-headed idea graced the official support pages of Outlook and Windows phone despite the fact that the then nascent Office 365 offered an Exchange Server that did a better job synching Windows phones than Google. Of course, that would have required the two groups to talk to each other and work towards a common, cross-silo solution.

This isn’t just a problem from the past. Today, official cross-platform strategies notwithstanding, Windows Phone, Windows Desktop, and Windows Embedded are run by three different groups that also, as far as I can tell, talk to neither each other nor their counterparts in other divisions at Microsoft. Similarly, even after the Window 8 phone launch the Dynamics team had to beg the phone guys for a some Win 8 phones to start working with, and one exec who was finally given one was only able to do so by leaving his first-born son as a hostage (okay, that part’s an exaggeration, but only a little one.)

The resulting lack of synergy and leverage are really damaging the Windows 8 brand, and doing a number on the whole of Microsoft: not a single major enterprise software company I’ve asked recently is planning on a major Window Phone push , customers and partners are giving up on moving embedded Window CE systems to Windows 8 and are moving instead to Android, and for four weeks in a row no big box retailer in the San Francisco Bay Area where I live has advertised a Windows 8 phone. Meanwhile the confusion about Windows 8 touch versus non-touch has smeared the brand pretty much across the board.

Then there’s Lync, which doesn’t. Skype, which does but could do much much more. Microsoft’s BI group, which is centered around SQL Server (a very 20th century notion of the relationship between data and analytics) and frankly doesn’t seem to understand that its greatest role is to be of service to the part of the enterprise where Dynamics lives (as an analyst who covers Dynamics pretty closely, I can count on Django Reinhardt’s left hand how many times the BI team has briefed the Dynamics analysts.) Office, which somehow muscled its way into owning Yammer (huh???), as if social was about creating Powerpoints and spreadsheets instead of driving collaboration into much higher value business processes.

Interestingly, Microsoft has already begun to fix its sales and services businesses to be more pan-Microsoft, and I think the Dynamics group – which, as the smallest piece of the pie, has the most to gain – is clearly and unequivocally pan-Microsoft. But the rest of the company is wallowing in fiefdoms and old tired visions of a past made from monopolizing the PC operating system that don’t, as they say, hunt no more.

So, combing software, services , and user experiences is the way to go. Hardware is part of that, so if Ballmer wants to pull an Xbox, or Win 8 phone, or Surface out of his pocket during his keynotes, more power to him. However the new Microsoft is configured, the fighting against itself has to stop. Microsoft has a great potential destiny to fulfill. But it has get out of its own way first.

SAP Innovates Innovation

If you’ve been following SAP over the last two years the products and services unveiled in Orlando last week wouldn’t have been too much of a surprise: HANA, cloud, mobile, social, and services all showed up at SAPPHIRE in their latest and greatest evolutionary glory. If you weren’t expecting most of the principle announcements at the show then you haven’t been paying attention.

But what wasn’t necessarily apparent until SAPPHIRE 2013 was the re-engineering of innovation that underlies this multi-pronged strategy. Indeed, rather than any individual product, it’s the innovation of innovation that struck me as the most important message of SAPPHIRE. While HANA and mobile are SAP’s two fastest growing product lines, the real growth worth measuring will come from the ability of SAP’s customers to innovate. Which means SAP’s success will need to be measured as much by its impact on its customers’ bottom lines as it is by looking at SAP’s own product and services revenues.

This innovation-squared approach also outlines the challenges that SAP and its customers face in a brave new world where core ERP functionality is more and more a commodity and the next new thing may be less of a packaged software play and more of a services play than many are used to. And while SAP’s motto, “innovation without disruption”, describes a sound, conservative philosophy that is in line with many customers’ aspirations, in reality a whole lot of disruption is going to have to happen, one way or another, if SAP’s ultimate dreams are to be realized by its customers.

But what I find most interesting is that SAP is really proposing a two-tier innovation strategy for its customers that allows them a degree of non-disruptive innovation first, and then a whole lot of game-changing, disruptive innovation second. That non-disruptive innovation involves, among other things, the deployment of HANA, as well as SAP Mobility, SAP’s Rapid Deployment Solutions, and new user experiences a la Fiori as baseline innovations that can significantly raise the bar for customers in terms of processing and throughput while still maintaining business as usual in their companies. The game-changing disruptive part comes from imagining what new analyses, opportunities, and business models can be created once this baseline has been established.

Suite on HANA and HANA Enterprise Cloud are emblematic of this opportunity: running the SAP Business Suite on HANA – on premise or in a private cloud – can provide tier one innovation for any customer that is up on its service packs and willing to invest in new hardware in either a classic on-prem model or in a managed services model. For many customers, the rapid throughput promised by HANA, as well as the overall simplicity SAP is promising over the classic Oracle DBMS environment, should provide enough innovation to justify the expense.

But innovation really gets interesting once HANA becomes a baseline on which to build net new functionality, and that’s where disruption is going to have to come in. A company that can suddenly analyze massive new quantities of data from every possible internal and external data source is now in the position to reimagine its business: Capabilities like advanced predictive modeling can allow a services company to predict outages and provide better SLAs to its customers, while a product company can better predict demand and manage supplies and bring to market new products it had never been able to build before. New research methodologies, new ways to deploy people, new ways of doing everything are now possible……

None of which can take place without a lot of disruption. While swapping an Oracle DBMS for HANA, or an on-premise Oracle DBMS for a private cloud HANA, can arguably be non-disruptive, the imagineering that is required for Tier Two innovation doesn’t happen just by writing checks and pulling switches.

Welcome to the Tier Two innovator’s dilemma.

Here’s the issue, and the opportunity, in a nutshell: Imagineering is hard because predictive modeling is hard, and modeling is hard for most business people because the underlying math and statistics are hard. Business schools may turn out spreadsheet jockeys and management-by-numbers execs by the thousands, but the creative skills required to look at a few petabytes of complex, variegated data and imagine the next new thing hidden in the bits and bytes are few and far between.

I met with Hasso Plattner and Vishal Sikka (respectively SAP’s supervisory board chairman and the technology and innovation executive board member) the week before SAPPHIRE and spent some time talking about the challenge of scaling imagineering and syncing it to the opportunity presented by Suite on HANA and the overall HANA platform strategy. Both Hasso and Vishal acknowledged the challenge in our conversation, and the impressive demos by Hasso’s grad students from the Hasso Plattner Institute on the stage at SAPPHIRE were one response to that challenge.

But sending in the grad students or the data scientists still amounts to the same thing. The best available methodology for Tier Two innovation today is to send in the experts, convene a workshop, sort through the business and the data and come up with the new model that drives the new analysis that drives the new business opportunity. Tier Two innovation is a consulting project, plain and simple.

And while this means that SAP Services, SAP’s consulting partners, as well as startups like Grok, Ayata, and others have a lot of work to do combining HANA and other new technologies with their services offerings, the fact is that scaling Tier Two innovation will take time. There aren’t enough brainy consultants who can translate big data into big business opportunity, much less do that in the context of HANA, mobile, new user experiences, or other innovative offerings from SAP or anyone else.

The good news for SAP and its customers is that Tier One innovation is relatively easy and accessible, and that for many companies Tier One is not just a good place to start, it’s clearly the place to start. And the message from SAPPHIRE is that there’s plenty to do at Tier One to keep SAP customers busy and SAP’s investors happy.

The view on Tier Two innovation is a little more complicated: most companies couldn’t move whole hog into Tier Two if they wanted to – my own experience is that most companies are not set up to operationalize big data: they don’t have the decision-making processes in place to leverage the new insights that big data can provide. And, as I already said, relatively few are actually able to create the big analysis and big insights in the first place, much less do something about them.

Which brings me to my final point. Two-tier innovation is a great strategy precisely because it defines both possibilities today and aspirations for tomorrow. But SAP has to get moving on making those aspirations as real – and scalable – as possible. SAP is a long way from being about to package Tier Two innovation, but packaging the imagineering should be possible.

At least I imagine it is…..

Infor’s Challenges: Is the glass half-full or half-empty?

If you count the hum of engaged customers as a sign of success, then Infor’s recent Inforum user conference was a major high-point for the come-back enterprise software vendor. The customers, all 6000 of them, were definitely there to praise Infor, not to bury it.

But the real issue for Infor will be to do more than just roll out some great strategies for turning over an historically moribund product set and making these products – and their customers – innovators. The big challenge is to maintain this Inforum buzz, and translate it into new software purchasing, as these strategies evolve and are realized in a sweeping set of new products and some interesting updates to its older product lines.

This is the classic “ability to execute” problem that all ambitious companies ultimately face, and Infor is no exception. The strategies look good, without a doubt, but there’s a broad, churning Rubicon to cross before Infor can say it has fully arrived as a 21st century innovator.

There are three major legs to this new vision that were highlighted at Inforum: ION, the company’s loosely-coupled middleware layer that’s tasked with stitching together the old and the new; SoHo, the company’s new cross-product user experience; and the vertical industry focus that Phillips promised at an analyst event earlier this year. Infor’s challenge is to execute on all three, while keeping the updates flowing to key products like SyteLine, Hansen, LN, and S3, among others.

Not surprisingly, keeping the updates flowing to the core products is the easy part. Many of these products, like SyteLine, have a strong product management team that’s been with the product for ages and understands what the customers and partners want and need to keep thing moving forward. I sat in on a couple of update sessions for these products and was impressed with how Infor is moving its core forward.

Infor is also progressing on its new products, of which ION is perhaps the most important, but that progress is tempered by the huge challenge that Infor faces with respect to executing on the ION vision. The challenge with ION is two-fold. The first is to sell ION as a concept that customers can bank on, and in the process make ION the go-to technology for application integration inside the Infor customer base. The second is to keep the customers interested and excited as ION moves through its early teething phases and acquires the robustness necessary to make the dream come true.

Both are always harder than they seem to be. The trick for Infor is to avoid the mistakes that Infor CEO Charles Phillips’ former company, Oracle, made with its Application Integration Architecture (AIA). Faced with a similar problem – the need to provide business process and technology innovation spanning multiple product lines – Oracle came up with an extremely top-heavy, master-data centric approach that required customers to build and maintain a canonical data model, inside AIA, that would make AIA the hub of process and application integration.

To make a long disaster story short, AIA collapsed under its own complexity (along with some other problems that have contributed to the lag Oracle is now experiencing in its software business), and Oracle’s customers went back to building and maintaining application and process integration the hard way: hardwired and peer to peer, and guaranteed to require lots of attention and maintenance as the applications that were hardwired together evolve. Vision: a solid A, ability to execute: a solid E.

This is exactly the fate that Phillips is trying to avoid with ION, while adding some very interesting capabilities. ION promises Infor customers a library of business objects (BODs) that can be used to integrate any of the dozens of Infor products to one another as well integrating third party apps like SAP or Salesforce.com and middleware like WebSphere. The goal, of course, is to make the BODs largely immutable, such that when any of the applications change, ION provides a valuable form of upgrade insurance that makes rewiring the connections between applications unnecessary.

ION has an added functionality that I find impressive: When ION is run in federated mode, all the data in the business objects that flows through ION can be used to populate what Infor calls its Business Vault, essentially a data mart that can in turn feed BI and analytics apps with operational data. With Business Vault able to capture all the cross-application and process data, this becomes a great way to run BI and analytics without touching the operational systems.

This ability to provide upgrade-proof integration and reporting is extremely compelling, but of course it comes with some execution challenges. First and foremost is the need for lots and lots of connectors and business object documents, or BODs. While the number of integration points in any cross-application process are usually limited, the sheer number of potential processes, when combined with the number of applications – Infor and non-Infor – that customers would want to integrate, makes for an interesting combinatorial challenge.

Staying ahead of that challenge is a non-trivial exercise, and essential to the execution side of the ION opportunity. Customers who sign on to the theory of ION will expect to see the BODs they need when they need them, and Infor will have to deliver and/or manage expectations about how long it will take to flesh out the BOD library.

Or else: customers that need integration – and can’t wait – will be building point to point integrations as a stop-gap measure. SyteLine customers, for example, who upgrade to the latest version will have to do that today. And the lack of future-proofing inherent in that model will make it hard for Infor to leverage the kind of cross-product business process integration – adding its enterprise asset management or warehouse management products to an existing application like SyteLine or LN – that is core to the new Infor Phillips is trying to create.

It’s a race – keeping customers interested and excited as the BOD library builds to a critical mass – that Infor can ill-afford to lose. Which makes ION an important bellwether for the overall success of the new Infor.

SoHo, the new cross-platform user experience that Infor is promoting, is another must-win capability that needs to succeed as quickly as possible in order to keep the dream alive. SoHo has three main components, in addition to a new look and feel for all of Infor’s core applications: Ming.le, the company’s social/collaborative software; Motion, its mobile platform; and its BI/analytics platform.

Ming.le is perhaps the most ambitious, and it has a basic design criteria that is near and dear to my heart – the promise of injecting business context into social collaboration, and vice versa. Ming.le demos this capability better than most social collaboration tools that aspire to be business process aware, and it definitely promises to make social collaboration an intuitive part of most standard business processes.

But Ming.le has some teething pains of its own to overcome. The first is ION, on which Ming.le is highly dependent. Customers that want Ming.le first have to implement ION, and that means that ION has to be up to stuff when it comes to integrating the applications and processes that customers want Ming.le to use. Customers also have to do some separate programming in JSON to make Ming.le work: This is particularly essential when it comes to the ability to “drill back” from a Ming.le alert or notification to the actual application where the content that needs taking care of originates – that all-essential business context that makes Ming.le more than just a tabula rasa activity screen.

While the design goals for Ming.le are spot on, there are serious limits to what it can do today or in the near term. Right now Ming.le can’t support non-Infor applications, nor can it support other social collaboration platforms. And some key capabilities for social collaboration, like universal communications and presence detection, won’t be available when Ming.le first goes GA at the end of May. Again, a great strategy and some great plans that have to somehow be enough to keep the customers interested and still loyal to the Infor brand as they plan their social/collaboration strategies.

The third leg of the stool is the micro-vertical strategy, which is also highly differentiating and will also be a major execution challenge for the company. Infor boasts 1700 partners, including 200 focused on ION, but it’s clear that the combination of direct sales staff and channel partners needed to cover 21 micro-verticals is going to need to be seriously expanded. Infor is building a specialized sales team targeting its top 150 accounts, and it’s building stronger ties to global systems integrators in addition to the smaller and more regionally resellers channel. But right now the company has a total of less than 1000 sales reps, and that’s a relatively small number for a company with such big ambitions.

Some of Infor’s ways of tackling these micro-verticals are excellent – the company announced plans for what it calls the Dealer Cloud – powered in part by ION and Ming.le – that will provide a cloud-based network for equipment dealers, OEMs, and their customers. It’s a great idea, and one that could help Infor nail down a key market or two, with the attendant execution problems noted above.

But managing the partner network needed to make Infor’s vision work across this many industries and the globe (42% of the company’s revenue comes from outside the U.S.) is going to be another key bellwether in the journey from vision to execution. Having watched Microsoft Dynamics continually fine-tune its partner network – most of which, like Infor’s, were legacy partners inherited through acquisition – the best thing to say is that Infor has its work cut out for it. Doing this in 21 micro-verticals just makes it all the more daunting a task.

If this assessment looks more “glass half-empty” than “glass half-full”, let me correct that impression. I think Phillips has a great team, a great strategy, and some eager customers. While there are a lot of key challenges, as noted above, it’s those customers who give me hope that this combination of team and strategy could ultimately work.

It’s fair to say that the 6000 customers in Orlando were probably the vanguard of the Infor customer base, and my read on that crowd is that they are much more hungry for new products and innovations than they have been traditionally given credit for.

What many have thought of as a dinosaur burial ground is actually looking pretty lively in terms of the expectations of customers for innovation from their vendor. Many of these customers are sitting on older versions of their Infor products that are either so old or so heavily customized that they will effectively need to re-implement in order to move into the 21st century. Until Phillips showed up, re-implementing meant leaving the Infor fold and hooking up with a Microsoft Dynamics, SAP or Oracle. Now these customers have an opportunity to re-implement without leaving Infor behind. Based on what I saw at Inforum, the customers are prepared to at least give Infor a second look.

The trick will be to turn that second look into a buying decision in favor of Infor. Incumbency has its own ROI, I’ve learned in my years of watching the enterprise software market, and Infor obviously has the incumbents’ advantage in its own customer base. If it can leverage that advantage, and keep adding new customers — Infor reported 3000 new customers in the last year – then this will be one of the great comeback stories in enterprise software. And one well worth waiting for.