Is “Pursuit of Profits” the killer of Innovation and the U.S. Economy? hmmm..I don’t think so


I saw this today morning on twitter via Frank Scavo

http://www.forbes.com/sites/stevedenning/2011/11/18/clayton-christensen-how-pursuit-of-profits-kills-innovation-and-the-us-economy/

It is an article on Forbes.com by Steve Denning, based on a talk at the Gartner Symposium ITExpo 2011 on October 16-20, 2011, given by Clayton Christensen.

While I have a lot of respect for Christensen, I don’t think all the arguments made forth in the article are reasonable. I do think some of them have social merit, although I doubt they make economic sense. Here are my thoughts for what it is worth. Of course, this is just my personal view, not that of my employer.

The Dell Example

So Dell did outsource most of what it does, and it does not look smart anymore. Makes perfect sense to me – but, that does not prove everyone who outsourced got burned.

The icon for American innovation -Apple – heavily depends on Foxconn in China for the profit margins of iPads. Does that make people say Apple is less innovative ? If Apple moved manufacturing jobs to US, it probably will lose a third of its profits (I guess..have not researched ). So it might not make direct sense economically, but definitely makes sense socially leading to indirect gains on economy too. Many more Americans will get jobs, but then either Apple will have less returns for its investors, or iPads will cost more – thereby reducing its appeal somewhat.

Dell and Apple are at 2 extremes probably. All I am saying is that for every extreme example used to make a point, there is almost always an extreme counter example.

There is one point I fully agree – if you outsource your core competence (assuming you can even define what it is in the first place), you have just booked your ticket to a chapter in the history books. Apple still keeps design in US so far from what I understand, and it helps them be in control. If Macro-economic conditions favor them, they could very well bring the jobs from China back to the US.

Business schools are to blame, but only in part

It is not the first time B schools get beaten up for everything that is wrong, and some of it is absolutely well deserved. But I don’t think B schools should be beaten up for teaching that profitability is a good thing, and that it is the ultimate goal of a business. Also, I don’t think anyone makes investment decisions based on any one ratio like IRR or RONA or any other ratio for that matter. B schools do teach that trusting any one ratio without context is a terrible way to make a decision – at least the one I went to did. Decisions are made by looking at a bunch of ratios in relation to each other, and then by absolute numbers and comparison to benchmarks, and finally by the experience and judgment of managers. In real life, it would take forever to make decisions without some help from ratios.

Where I agree wholeheartedly is that some financial analysts dumb down these ratios to compare companies which have no similarity. That is not the fault entirely of business schools – it can be argued that it is the fault of the business itself. Business Schools just ape what seems to be SOP for business. Over time this is a chicken and egg problem – trying to figure out if academia started it or some one in the street started it. In short – B Schools at best should only be blamed for some part of the problem.

The case of Fabless companies – did they really miss the point?

From the late seventies / early eighties when fabless started to today, that industry moved from just about a million dollars between 3 companies to the top 3 companies ( Qualcomm, Broadcom etc) making about 15 Billion dollars or so today, and growing steadily. These companies do the design and then trusts contract manufacturers to build. The one company that does all manufacturing by itself – Intel, is also now going after the business of letting other companies use its terrific foundries. And where does Intel do all its manufacturing – is it in US? Nope. Semiconductors are very cyclical, and innovation typically outpaces the ability to keep up investment in fabs to match it. So there is a higher threshold for entry into this field. As long as design capabilities ( design in/ design win) remain in US, why would US lose out?

As things get to a stage in maturity curve when the manufacturing process is fairly repeatable, I would argue it continues to make sense to outsource the repeatable process. The innovative part – the brains which do design – are the ones that should not be outsourced. The resources saved by outsourcing can then be utilized for the next round of innovations. There is only so much investment to go around – just as we did not hold tight to horse buggies when it became possible to mass produce cars, we should not hold on to the past just to be extremely risk averse. if we do so – then we will not be able to invest in further innovation.

There is an angle of incremental innovation vs disruptive innovation that should be considered. Outsourcing can probably hurt the incremental innovation side quite a bit. However, if the money saved by outsourcing is reinvested partly to R&D for disruptive innovation – can’t it be argued that it more than makes up for the opportunity cost?

Cost accounting surely needs to evolve

I readily agree here. We have to understand that the world is not static, and there are always new types of costs that need to be addressed. But this is also subject to interpretation to a large extent – it is a best guess to compare opportunity cost of “lost knowledge due to outsourcing” to “investment in new innovation”. The reason is that in both cases – it is only after the fact that we can see what the benefits truly are. So this is not a concrete argument, although it has some merit.

Customer delight vs Profitability

This is where I have the biggest disagreement. If the end result is customer delight, and profitability is not an objective – why is Apple not selling iPads for $50 or for cost or free even? Obviously customers will be delighted if the price is lower with the same set of features, right? The reason is simple – the company that is not profitable cannot invest in innovation, or reward its employees enough to delight the customers on a sustainable basis. Customer delight is a great means to an end – not an end in itself.

In every case, customer is not the king. When something new comes into the market that customers like, sellers are the kings. Semiconductor industry is an excellent example – they ran on quota basis for a while, but cannot do so for the last few years. Once competition starts heating up, sellers cannot take the same attitude – and slowly make customer the king, and try to delight them. But seller’s motivation is always to make the next thing that makes them king, and ride the next wave. If you just try to ride any one wave for long – you risk the chance of booking the history chapter ticket. IBM and Apple and many others have proven this already in history.

What is killing the US economy and Innovation then?

In my un-researched opinion, it is due to multiple factors – which need comprehensive long term policy changes . Education is one area that I think where US needs to concentrate the most. Without Science, Math, Design skills etc being encouraged big time – it will be hard to remain competitive over time. Immigration is another – why wouldn’t US want to keep the large chunk of students who come here for higher studies, instead of making it difficult for them to get visas and permanent residence? And about taxes – why would we not have tax laws that make it attractive for US companies to bring back money home from abroad?

This country has solved some of the biggest problems that mankind ever faced. I would think these problems we face today on the economy can be solved too with our collective will – if only people can let go of the left/right type thought process and other petty differences and instead look at the problems with the sole objective of solving them.

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Highlight of Madrid SAPPHIRENOW 2011 – meetings with Snabe and Sikka


I am sitting in the flight back home from Madrid, and reflecting on what were the most interesting highlights of the week I spent in Madrid. I am pretty convinced it is the meetings I had with Vishal Sikka and Jim Snabe. Parts of the meeting are under NDA, so I cannot discuss it here.  But that is not the point – despite some execution issues which SAP faces in my opinion, I think the leadership of people like Vishal and Jim is pretty critical for SAP to get their strategy to action.

Vishal is not a large company CTO type – he has the energy and passion of a start up guy. This is a guy who shuttles around the world talking to different teams at SAP, and directly engaging with Customers on a regular basis.When I met him in Madrid, he said he is there only for 20 hours or so. And then in a couple of days, he had to go to China for Teched keynote. And once he started talking – he was like the “energizer bunny”.  I truly wish I had that kind of energy, and I don’t know how his team deals with that 🙂

He does not hold back – he is candid to a fault, and it has been a big learning opportunity for me whenever I get to meet and talk with him. I do not agree with some of his ideas, and I do agree with some. But irrespective of my POV, I always admire the honesty in his position. There is no sugar coating – what you see is what you get.  But then again, it is not just his personality alone that makes him successful – he hired some really good people to work for him, especially on HANA.  Where I think he could do better is to get SAP’s development army to keep pace with him.

I also had the good fortune to meet Jim Snabe twice – once for dinner (here is a photo http://img.ly/afEe ) with few other bloggers, and once again the next day with fellow SAP mentors.  I was quite impressed with how much he listens to feedback, and then builds up on those ideas.  He is one of the most balanced C level executives that I have ever met, although I am forming my opinion after knowing  him only for a short period. Jim does not challenge people per se – he challenges ideas with open ended questions.  And when he explains the rationale – it is very structured, and you can immediately make out that he did not just make something up on the fly. He can also relate to the history of SAP better than most other SAP leaders , which is a unique characteristic which is quite valuable.  And he acknowledges and thanks people when something comes from the other side of the table, that he has not thought through himself.  Last but not least – If I were in Jim’s shoes, I doubt if I would have gone out for dinner with a bunch of bloggers the night before SAPPHIRE keynote 🙂

Unlike Vishal, Jim grew up in SAP. But despite the difference in their backgrounds, I was quite pleased with how they could both explain SAP’s value proposition and future clearly, albeit in 2 rather different ways.  Same destination – just two different roads.  Having also watched Bill McDermott in action, it is kind of interesting that the three top leaders at SAP all bring unique, but complimentary value to the table.

I am looking forward to meeting both these gentlemen in future, and continuing the great conversation.

Redbull migrates BW to HANA – I am suitably impressed


SAP allowed some of us bloggers to interact with Christian Stoxreiter of Redbull. They just finished migrating their BW system to HANA. We will see him during Vishal’s keynote tomorrow I think explaining in more detail. I am a big fan of Christian now after he made the comment “We want to be dynamic and flexible, but we are NOT stupid. I know the difference between marketing slides and actual technology limitations”.

 

There is a lot that impressed me with this .

 

Redbull has been an SAP customer for 11 years. They have ECC, CRM and BW. The BW system which is 1.5 TB in size was moved to HANA platform and now the data size is 300 GB. What is even more impressive is that 200 GB out of this is in row model, which means once the data models are rationalized – it will get even smaller.

 

It took just 10 days to migrate BW to HANA. Of course this included working night shifts and all, and had the best of SAP techies on the job. The relationship between SAP and Redbull has been at board level from SAP, with Vishal Sikka being involved directly.  But even then, that is quite a short period to pull this off.

 

Redbull did not see a big improvement in query performance because they were already using BWA.  Moreover, they found that HANA does not have all the features that BWA gave them. But they think this is ok, because SAP is commited to working with them to put in features in future revisions of HANA. However, ETL performance improved in some cases from 50 minutes to 2 minutes.  This is a big value add for them since their total ETL time to get global data from 39 countries to a single BW instance was 32 hours or so.

 

Redbull thinks HANA is a great investment for them. They are not doing HANA for just BW alone. They want to influence SAP on Trade Promotions Management on HANA. They also have key areas in ECC where they want SAP to make things better. Redbull thinks they can influence SAP due to the first mover advantage. I think they are thinking smart here – sounds like a good strategy to me too.

 

Redbull’s BW on HANA is running in parallel to their disk based BW system now, and there is no clear answer yet from SAP on when they can put BW on HANA as stand alone without running parallel. But apparently that decision will be taken by next Monday on the time frame. Redbull is fully aware of limitations in HA/DR etc, and made an educated investment and they believe that it will pay off in spades down the line. I think this is pretty smart of them since it is a product that is gaining rapid market share ac, and will face an information explosion. My making an investment now, they will be well placed to concentrate on business without worrying about handling all the data that comes in future, including unstructured data, social media feeds etc.

 

Redbull has a clear vision for ECC running on HANA in future, with no aggregate tables etc. Again – smart in my opinion, since this is key to get SAP to create cutting edge new innovations on the core.

 

I have been fairly critical of SAP on several aspects of HANA. But this one is different – and I am glad to say SAP did an excellent job, as did Redbull. Good luck, and I am eager to see how BW on HANA will evolve. Maybe we will get more in keynote tomorrow.

 

 

SAP SAPPHIRE and Teched 2011 Madrid, Tuesday – HANA, BI 4.x, Netweaver et al


My day started with informal discussions on future of BI products. Mobile BI is of course a no brainer next big thing.  Question is how is SAP going to tackle this? Webi is by far the most commonly touted mobile BI client. Xcelsius has the flash limitation on iOS, and even on Android – not all controls of Xcelsius work that well. Some time next year, when an Analysis client for mobile goes into ramp – there is an option to generate HTML5 layouts. If SAP does a good job on this, I would bet that this will start Xcelsius on its death march. Xcelsius is a great tool – but popular opinion is that it is not scalable for thousands of users. I have seen few hundreds use it, but not thousands. So I personally don’t know, and am willing to stand corrected. I will ask around more while I am here.

Next up is a question of how to best make dashboards etc out of ECC.  The big limiting factor in my opinion is that universes do not work on top of ABAP data dictionary. And if you go directly against the tables at SQL table – you will lose out on security, semantics and most probably will violate licensing agreements with SAP and the DB vendor.  The smart thing for SAP to do will be to allow universes to be built on ABAP data dictionary. This could single-handedly give an explosion to licenses sales for BOBJ. Any one listening  at SAP from sales side? To check out – I spoke with Adam Binnie, the GVP for BI. Many thanks to Andrea Kaufmann for finding some time for me with Adam.

There is no solution now or on roadmap to solve the flash compatibility issue. Adam said SAP team is checking on this in a research mode. It is not an easy problem to solve – there is a huge userbase for whom a disruptive solution might be painful to the extreme. Plus SAP has a limited option on a problem between Adobe and Apple. Nevertheless, SAP owes the world a solution for this somehow.

Although I feel SAP has not given Xcelsius the love it needs in near past, Adam thought otherwise. I think the disconnect essentially is that whatever is driving the product roadmap, probably is not very well integrated with the ecosystem. Adam said he will look into it, and that by end of the year he plans to put some concrete actions in place.

On the universe on top of ABAP data dictionary issue, it did not look like a priority for SAP. Adam thought this might be because multiple semantic layers (as in ABAP DDIC, and Common Semantic Layer from BOBJ both) might be against SAP’s design principles. Again, he agreed to check with his team and give me an update.

Of course no day passes in SAP land for me sans a thought on HANA.  if we fast forward to future – the big big thing is ECC running on HANA.  Is this the final frontier?  I am not too sure .  Over the last decade or two, SAP has made a lot of DML optimization already. Standard Business Suite behavior is to select once from database, hold it in memory – and then do all kinds of business logic in ABAP. So you could select a million records, filter it to hundred thousand with logic – then take it through Authorization checks to find what will pass, and end up with 10 records. If this logic is not rewritten completely – how much of benefit will SAP get by simply putting the tables in memory?  And think of the re-write – can you replace the ABAP logic with a bunch of database stored procedures ? Can you find a clever way of passing authorizations to hana at database level and not let ABAP do it? Will this mean HANA gets an ABAP interpreter? Too many complex issues to be solved to make it work efficiently.  So I raised this with SAP’s Deputy CTO Sethu Meenakshisundaram and a member of his team, Frank Samuel. Here is what they had to say.

SAP has a vision on how this would work going forward. The key to that is building a good foundational meta model in HANA that can represent the business objects in ABAP. Once DDIC, Security etc are modelled, then a standard API set can be used by ABAP and non-ABAP systems to do complex processing with HANA. But given the sheer amount of work, this will take some time to complete.  A consistent set of user friendly APIs is a tall ask for SAP in my opinion, based on what I have seen in past. Maybe they will do better this time.

Jon Reed brought up the question on multi-tenancy in the meeting. And I had posted this question on my blog earlier. I was quite pleased that Sethu had read my blog before hand. So according to Sethu, HANA is built as a multitenant model, except it is not used as such. Apparently, this is a simple thing for SAP to flip the switch. This is very different from what I have heard before, and I mentioned it to Sethu. He agrees that communication on HANA needs to improve from SAP’s side to minimize confusion. In any case, SAP not only needs to flip that switch, it should also build apps on HANA that are multi-tenant. And Vishal should mention it in his keynote to make sure the world is not confused, unlike what happened with ORACLE. BI OnDemand is a good start in this direction, and I expect more such things to come up in next few years

SAP has a grand vision on how the in-memory platform will help business. And i truly like what I heard. Sethu thinks Supply Chain is an area where SAP can do wonders with this, and I agree.  S&OP for example is an area where I have heard many customers request more of SAP. However, vision and execution needs to match.  SAP’s execution on HANA is not exactly stellar so far in my opinion, but I guess they will get there soon enough.

Next up was a meeting with Bjoern Goerke who is the Corporate Officer in charge of Technology and Innovation Platform at SAP. As always – a terrific meeting. I asked the same question on HANA multi-tenancy to him. His answer was more tentative than the one I got from Sethu – “not now, but we are working on it, and will get there soon”. While he agreed on the need for a good meta model on HANA and a framework for all the aspects like security, user provisioning etc – he could not give out any time frame for it. “One step at a time” was his answer. I respect that, although I think these are all things SAP should get out to the ecosystem as soon as they can. Technology should not be a huge limiting factor here – ABAP DDIC itself is stored in tables, and parts of this concept is already in use by other parts of SAP like BW replication etc.  SAP should do all they can to improve speed to get these things out of labs to the ecosystem. I asked Bjoern if BOBJ universes will be built on top of ABAP DDIC, and did not get a clear answer.

I did provide some feedback that HANA studio is not exactly a fine artwork, and got some assurance that it will improve constantly. SAP is moving all the developer studios to eclipse, which is the right thing to do. ABAP on eclipse is already available to see in the booth here. Apparently 7.3 Netweaver is doing great, and has 300+ live customers.  A lot more info on neo and ByD etc were discussed, and between Jon Reed and Dick Hirsch – I bet they will post their views after the meeting.

I would be terribly remiss if I did not mention this – Stacey Fish and Andrea Kaufmann from Mike Prosceno’s team deserve big time kudos. They are not only super helpful, they also try their best to give us as much information as possible so that we can form a more educated opinion before we blog. If they worked in my team, I would be writing performance bonus recommendations for them now. I cannot thank them enough

SAP Teched and SAPPHIRE 2011, Madrid – Monday


Fellow SAP mentor, Harald Reiter and I flew into Madrid on Monday morning from Phoenix on the same flight. Uneventful flight, and I managed to read about 400 pages of Steve Jobs biography. It is an impressive book, and I recommend it readily. We were a bit surprised at how long we have to walk from the flight to passport control counter. And we got a cab to go to  Hotel Silken Puerta América Madrid

 

A bit of an unusual hotel, I must say – looks very modern, unlike the regular Hilton and Marriott ones I get to stay during my work weeks in USA. Took me a few minutes to figure out how to make everything work – including curtains, lights and stuff.  Like many European hotels – the breakfast spread was awesome. We had a nice time catching up with the ever helpful Stacey Fish and Jon Reed at breakfast.

 

Another cab ride brought us to the convention center where innojam was in full swing. It was a lot of fun watching people do this, especially since I was spared the stress of another 30 hours of insomnia trying to get new technologies to work myself 🙂

 

While contestants were busy making final touches, Jon Reed and I got into a good discussion on HANA. I showed him some use cases on HANA that my Advanced Analytics team at IBM did.  Harald joined in too – and it was a fun discussion. Before coming to Madrid, I had put up my questions for SAP on HANA. https://andvijaysays.wordpress.com/2011/11/01/sapphirenow-2011-madrid-a-few-hana-questions-if-i-may/  After discussing with folks here at innojam – both SAP and non-SAP folks – my impression is that I am not the only one with these questions.

 

Rui Nougueira asked if I can stand in for a judge who could not make it to Madrid. It was quite an honor, and I readily agreed. My fellow judges were both senior SAP executives, and I was quite amazed with the content presented to us. It was webcasted live globally, and I believe a replay link will be provided in Teched site soon. First prize went to Carbon TNT – and that team did an amazing job with both technology and presentation.The prizes were given away by my colleague, since IBM loaned the HANA server to SAP for the event.

 

Post innojam – Harald and I caught up with Juergen Schmerder of SAP who is the man who runs all the systems for innojam. There isn’t a problem this man is not aware of, and he has been in SAP since 1999. Total straight shooter guy – and he gave us a lot of good information on HANA. I also spoke at length to Ruks Omar who is in the HANA marketing team.  Without going into all the details – I can just say this – some of the smartest people at SAP are trying to make HANA work perfectly on technical side. Where SAP absolutely needs to shore up is on talent to relate it to business problems, and a consistent methodology for HANA implementations.

 

Last event of the night was a mentor gathering organized by our chief herder Mark Finnern, and deputy herder Aslann.  It was great to catchup with all the mentors from Europe whom I don’t get to see often.

 

Dennis Howlett gave me a ride back to the hotel and I got a first hand taste of how Madrid traffic. I am glad I did not rent a car here. Tuesday is an action packed day with many nice meetings on the schedule. Looking forward to it

 

 


 

 

Thoughts on SAP Outsourcing, Part 2 – the Devil’s Polygon


Now that I have walked down the memory lane, this time around let me share some thoughts on what earned outsourcing a bit of bad reputation. Again, this is all just my personal view and not that of past or present employers. Outsourcing is not a perfect world at all – and the ill will it generates can be attributed to a devil’s polygon ( taking a  clue from my friend Mike Krigsman  who is famous for Devil’s triangle). Many players are involved and they all have different POVs.  Since I have not worked from the customer side – I don’t claim to be totally objective in my thoughts. But for what it is worth, here you go.

1. Pushing people through the career hierarchy before they had a chance to make mistakes and learn at the lower rungs is a common scenario in this high demand market. If a developer makes a mistake, it can usually be corrected without too much trouble. And then the developer learns what not to do, how to react when things go wrong, how to explain to client and management etc while limiting the risk. If this developer became a team lead or a PM too quickly, and goes through the learning process with errors at that level – chances are it won’t end well. Bad managers are the biggest reason in my opinion on why outsourcing earned criticism.

2. Lack of understanding from customers on what they bought, also ranks up there on top. Before outsourcing, a customer would have had an inhouse team doing everything. And since the IT team sits next door and goes to lunch a beers with you, there is generally a good camaraderie. If you make a call to your friend and ask her to add a field to a report, she will probably oblige occasionally without a formal process. She might also offer some support over phone if it is not in office hours for sake of friendship. When outsourcing happens – you are already stressed out that your friend is not in that job anymore, and you need to follow a rigid process to get things done. No one told you that for cost reasons, your management only bought 8 hours of a day of support. So when that last minute change is needed on Friday at 4 PM, chances are that it won’t get done before you go home.

The funny part is that the same people as consumers are totally fine if this happens to them with say a cell phone company. You raise a ticket, wait for it to be fixed and you cannot call for updates every minute. For days at length, you will be forced to see “in progress” as status on their website. Yet we get stressed out if the same thing happens when our own employers outsourced to another provider.

My biggest gripe with how companies buy outsourcing services is the lack of due diligence on customer’s part on what they need to buy to do business as usual. If the service provider tries to educate the customer – more often than not, it will be percieved as “hard selling”.  I am not letting the outsourcing companies off the hook either – they need to better explain what is in the basket and what is not.

3. Economic differences are a big contributor  too. When USA and Europe are going through a bad economy, and we lose jobs to Asian countries – we of course will feel bad. What we occasionally forget is that it is a direct result of how capitalism encourages competition. If local workforce can come up with a model where they can be competitive, there is a fair chance that a lot of these jobs will stay here. We cannot take a stance that “I will continue to do what I have done all my life, and I expect to get same or better pay, and I will refuse to believe my skills have become commoditized.”. Apples to Apples – it will be difficult for a person in US to compete on a wage basis to a person in India or China. However, if the game is changed – say the person in US can form a team that supports multiple clients, and provide better service – there is no reason why this should not work out well.

4. Social differences are better now from the time I started in SAP area. I have sat in many meetings in my first few years in America and Europe and listened first hand to “oh this is not complex, we can probably throw it to the Indians” and “they are just ABAPers” and “do you go to office in India on horseback?” and many others that were so rude, that I cannot bring myself to write it here. It took a few years for me and many other colleagues from India to feel that we are part of the team too. This has vastly improved with time. When you feel crappy on the social side, it is pretty hard to concentrate on work fully. Although I felt terrible at the time , I also realized later that my American and European colleagues and clients were not trying to be intentionally rude. They had never been to India before, and they found it incredibly hard to understand my thick accent and long name. They also did not know why their employers got Indians to join the team in the first place. A lot of this frustration on both sides could have been eliminated or at least reduced if outsourcing companies and clients who bought their services communicated the plan clearly and did so right upfront, and not after every one got wound up.

I will also tell you a rather funny story. A good friend of mine – also an ABAPer from India – started in US working for a client of mine. I was working in a US based big SI, and he for an Indian firm. Client used to treat consultants from my employer kind of on par with their own staff, and we would get invited to nice dinners and ball games and so on. My friend on the other hand never got this opportunity, and did not know this was going on. A year later, he joined my employer and started seeing the difference in how he was treated by the client. And when we went live, the development lead from the client congratulated my friend saying “this guy from so and so company wrote a brilliant application, and our users love it. It totally validated my reason of hiring this SI to help us be successful”. We all cheered big time, but the funny part is that this terrific app was written by my friend way before he joined my employer. He never told the client manager, but till date – every time I talk to him, we joke about this.

5. In a dog-eat-dog world, people snipe quickly to protect turf. Having worked for very small and extremely big employers, I can say with some confidence that neither side has earned the right of  “holier than thou” . I have been sent in to rescue projects screwed up by cowboy developers from small SIs or independents . I have also worked in very small shops where we were appalled by the work done by the SI who put in the SAP solution. In general – big SIs get more of a bad reputation in these cases because they have a recognized brand. People who are independent now or work for small shops – most of them had a history of working at a larger shop before where they gained experience and became the big expert. So it is not as if when they moved out, the past shop became pretty bad. People and companies protect turf – and customers know that only too well by now.

6. People forget that SAP product was not this mature in the mid 90’s. A lot of work that looks terrible when we look back were clever work arounds that were done to make SAP work on those releases. When such a system gets outsourced for support, and complex problems arise – they might not have elegant solutions. Short of reimplementing SAP, usually the only way is to apply even more band aids. But when this is looked up on from outside, it looks terrible and the fault is attributed immediately to poor skills of the people supporting it.

7. The factory model used by many outsourcing companies get a lot of flak – usually from people who do not have the ability or scale to do that. Factory model works – if it did not, many big businesses would have closed shop by now. Obviously, this model needs a revamp since the model has not kept up with advances in technology, especially on infrastructure side. The reason it still survives is because – despite all that is bad with it, it gets the job done cheaper in most cases (when it does not for a few cases, it gets more bad press than the many times it works). Factory model works only if it is implemented properly, with the associated change management. In several cases, the change management gets kicked to the curbside, and then it goes downhill pretty quickly. If all parties know how the model is supposed to work, and commit to it – it works like a charm. When you skimp on some parts, it fails. Outsourcing companies and clients need to do a better job in change management, and educating the clients and their own staff onsite on what it takes to get it done successfully.

8. Talent retention is an issue for customers as well as outsourcing companies. However, outsourcing companies have scale in their favor. This is their bread and butter business and they have a better ability of sourcing and retaining talent. However, there are things that are not in anyone’s control – like the current restrictions on work visas in US. A lot of plans that were put in place long term for outsourcing projects, now need to be revisited, and I expect some outsourcing horror stories to surface. From the perspective of local work force, this is great – because it provides a window of opportunity to get good jobs. The current demand and supply situation is kind of weird – there are lot of unfilled seats in technology jobs, and there aren’t enough skilled people to take it. This skill mismatch is a deeper problem that needs a re-engineering of fundamental aspects like education reform etc. It will take time to fix.

9. As an inhouse expert in SAP – it is pretty common that employees gain exposure to multiple skills. I have many friends who can do ABAP and SD configuration and BW. This is not a model that outsourcing companies have actively worked on in my experience. In traditional outsourcing models, due to price, nature of work etc – ABAPers generally do only ABAP, and BW folks only do BW and so on.  A small percentage will get cross trained , but they are the exception. However, this part does not get recognized when these people are pulled into outsourcing projects. I have heard hundreds of requests from customers on “why can’t you find me an SD consultant who can also do BW reporting? Joe , who used to work here, could do all of that plus some ABAP” .  It is not easy to find a like-for-like replacement for Joe at the price a customer is willing to pay for that service.

10. The most common complaint you would hear probably is “these people are still stuck in ancient ABAP coding ways. They don’t do OO ABAP, they don’t know what web services are…are they living in a cave?”.  Most outsourcing shops – atleast the good ones – have good training programs that train people in latest and greatest technologies. However, not everyone is sent for that training. It is expensive to train people, and companies won’t invest in training tens of thousands of people unless they see a demand for the specific skill, and a premium for it. SAP is generally very backward compatible  – so several customers have decided to just move on with that is already built, and just “keep the lights on”.  They will try new things for new projects – but are generally hesitant to fix existing ones. As a result, the people supporting these projects have to remain in the old way of doing things. We should also understand that in most cases – time to develop a solution trumps everything else.  So if there is a bug in a program, the biggest requirement is to fix it and get it back to working state. In the hurry to fix it, more band aids get applied.  Unless a customer is willing to spend money on cleaning up existing mess, this problem will only continue to get worse.  In current economic scenario – I doubt how many will open their wallets to do that in near future.

It is hard to keep this series in a structured format with so many things rushing to my mind. But I will try my best to get it more organized as I move forward. I am typing this from the plane on my way to work, and lack of good coffee has to take some blame for my random thoughts too 🙂

SAPPHIRENOW 2011 Madrid – A few HANA questions if I may?


I am going to Madrid next week to attend SAPPHIRENOW. SAP is paying for my flight, hotel and admission. As I am preparing for the trip, I thought I will share the questions I am looking to get answers. My understanding at the moment is that HANA will bring in 100M Euros this year. It is quite impressive for a 1.0 product, and SAP deserves kudos for getting customers to buy HANA in a bad economy.

 

So, here are my questions.  I am hoping to get them all answered next week in person, or if I am lucky someone can enlighten me in blog comments here itself.

 

Customer Perspective


1. How many customers are using HANA in production ? So far we know of 2 that were announced at Teched. Will we see a few tens more announced in Madrid?

2. How many customers that did POCs with HANA – the ones shown on stage at SAPPHIRE Orlando, took their POCs to production and are running their business on it?

3. For those that took it to production – how are they dealing with High availability/ Fail over / Disaster Recovery ? What would be really nice is if SAP lets us talk to these pioneering customers directly at Madrid.

4. I saw a tweet from SAP internal IT manager http://twitter.com/#!/MatthiasWild/status/130031370457198592 that SAP internally went live with BW on HANA, but it is just a parallel system to a disk based BW system. This is because of HA/DR . How many customers will buy HANA for BW to run it in parallel? Jeff Word announced two live HANA on BW customers will be present at Madrid. Are they solely on HANA, or are they using another disk based system as primary BW  instance?

 

Applications Perspective


1. Will SAP unveil the killer HANA app in Madrid that makes HANA more compelling than a fast database?

2. How many partner apps have been created during the year on HANA?

3. With HANA supporting R, will statistical processing logic need to be written from scratch in R, or will business functions be available that hides R from developers?

4. Who owns the IP rights if a partner develops a HANA app?

 

Partner Perspective


1. What is SAP’s vision for SI’s in future of HANA ?

2. Is there a market for smaller SI’s in HANA for SMB?

3. Of all the projects in HANA that are going on, what percentage is directly driven by SAP ?

4. Are there benchmarks and testcases for partners to use when implementing HANA solutions? It would also be good to see comparisons between IQ and HANA for same query on a given dataset.

5. Now that SAP has sold a lot of HANA, can we have better sizing tools? We all lived through the pain of incorrect sizing on BW and then BWA. I hope to not repeat this with HANA.

6. I have heard bits and pieces on HANA pricing on BW. Will this be clearly explained at SAPPHIRE Madrid ?

 

Cloud Perspective


1. What is the HANA cloud? does such a thing actually exist today?

2. Is HANA multi-tenant? When I read this http://searchsap.techtarget.com/news/2240106165/McDermott-addresses-questions-over-SAP-BusinessObjects-40-HANA it looks like there is a HANA cloud already that works. Is this true?

3. Does ByD already work on HANA? If not – why and when will it?

4. What is SAP’s solution for ETL to cloud for HANA to get huge volumes of data in real time?

 

Future Perspective

 

1. Where is the money going to come from next year from HANA ?  BW with HANA is a very good next step. BW has 16000 installbase or so. If SAP gets 25% of that to buy HANA at a million dollars each, they will make a significant jump in the size of the company. But how many will buy HANA as DB? BW customers are either really big (maybe top 100 customers) and the rest are usually much smaller.

For the big customers – they will have long term existing licenses from ORCL etc for enterprise which might not be easy to get out of in near future. Also, these tend to have business critical use cases- like for financial close etc. How many of these will jump into HANA as DB when it is so early in maturity curve?  And for really big systems – will they be successful using commercial hardware? Or will they need special hardware built for them? I have not seen yet a comprehensive answer for scale out from SAP.

For smaller customers – the majority – how much of a pain is BW really? Most customers by now would have solved most of their painpoints on performance etc. And even if they have not, will HANA licenses be more cost effective than buying more fusion io cards and RAM / SSD ?

2. When will ECC and rest of business suite run on HANA? And when it happens – will SAP still give customers the choice to have ORCL etc ad DB? As database vendors bring more and more sophistication into their products over time, will there still be enough of a value proposition to have HANA as a DB?

3. What percentage of ECC transactions will benefit directly  from HANA  in terms of real value? Will there be an option to point just these parts of the solution to HANA and rest to disk based DB to optimize cost?

4. Even within a high value analytics use case, not all data needs to be analyzed all the time. So if I have 10 years of data, and I generally go back in time only for 3 years in most queries – will HANA let me store my old data in disk, say in IQ?

 

There you are – and if you have additional questions that you want me to ask SAP while I am in Madrdi, please leave them in  a comment here.