And Appleby says , It’s Cloudy out there…

For the first time ever on my blog, I have a guest post by my dear friend, John Appleby – fellow SAP mentor, blogger and an executive at Bluefin, in London, UK.  So without further ado – Ladies and Gentlemen,  I present to you, John Appleby 🙂


When you go to a major conference, tributes to the blogging gods must be paid. Not because we have to, but because the creative energy that surrounds such an event makes you think. And in this case I’d like to thank my good friend Vijay for hosting my thoughts.

And it was so that a senior executive in SAP came over to me whilst I was stuffing my face at lunch and said “John, if I understand you correctly, you believe it is still Cloudy?”. He was referring to their cloud strategy but I realised that actually, I have no clue what an Enterprise Cloud Strategy looks like.

It is true that there are two broad cloud business models that indisputably work.

Small and Medium Enterprises – the suite

I know that if I were starting a new business, I wouldn’t invest in IT assets. I would let each employee expense a laptop and provide then access to some cloud services. And it is so that Netsuite has grown to a $236m revenue over 12000 customers which means an average of $1600 per customer per month. Margins are low but customers are buying.

So as a small business, organisations may buy from a single vendor or from a collection – depending on what suits the needs best. Either way there is no desire to have expensive IT assets in an office somewhere.

Large Enterprises – innovation in LoB

Large Enterprise ERPs are inflexible and as a result, organisations like Salesforce, Workday and so on have poached customers from the large ERP vendors like SAP or Oracle. There are a small number of such potential solutions that are horizontal (i.e. apply to all industry verticals) and a very large number that are industry-specific.

Salesforce Automation, Procurement, Cash Management, Credit Management, Talent Management – all of these and more are relevant such areas.

Is there a demand for a Large Enterprise Cloud Suite?

I’ve spent several late nights discussing this with all manner of people, including good friend Dennis Howlett who claims “the suite always wins”. He might be right but I think that it is in conflict with the current cloud market dynamic.

The reason for this is because right now, it is a number of niche players that have thrown together an app, integration and have created massive demand. But the operating margins are very slim. For Salesforce it is 6%. For Success Factors, there is a small loss. The same for Ariba.

Most of those companies survive as far as they have by trying to grab land as fast as possible and by creating platforms that move quickly but are not carefully architected. So suppose you want some of this market – would you rather try and build something, or acquire?

The problem in building a platform

The challenge is simple: those organisations throwing together a platform can barely make the economics work. But if you build a full cloud platform then you lose agility and add cost. This makes no sense at all economically, and nor could you compete with the niche LoB players like Salesforce, that are normally bought directly by the business.

How do you convince Sales and HR that they should buy a common platform? What is the benefit of that? What’s more there is very limited benefit in doing Financials at all – it’s just a means for posting.

Is land grab the only strategy?

This leads us to what SAP have been doing so far. They acquired Successfactors for $3.3B and Ariba for $4.3B. Given that Salesforce and Workday are not for sale, there are not many horizontal vendors left. The major area is that of areas of Finance – cash management and credit management. Are there others? Other than that there are a bunch of LoB apps focussed on Industry Verticals.

But in the end, I suspect that grabbing users and apps is the only relevant strategy right now. What happens next is the interesting part. Common sense dictates that Dennis is right and the suite will win in time, and therefore the only sensible strategy has to be to build out a suite to underpin land grab.

Final Thoughts

One thing is for sure – I wouldn’t want to have Lars Dalgaard’s job. Getting this part right is near impossible. It’s cloudy out there.


Published by Vijay Vijayasankar

Son/Husband/Dad/Dog Lover/Engineer. Follow me on twitter @vijayasankarv. These blogs are all my personal views - and not in way related to my employer or past employers

8 thoughts on “And Appleby says , It’s Cloudy out there…

  1. @dahowlett,


    i think we are in agreement here. SAP needs to watch Workday/FinancialForce as they encroach on their franchise. i think treating its developer ecosystem better than the upstarts helps tremendously as they weren’t really ready to deal with less than 100 strong benches last time i checked. BTW, i’m open to kick the tires as i’m sure many of dedicated SAPpers are. #BB is only too happy to sell whichever vendor solution commands premium pricing even if it competes with their own.


  2. @dahowlett,


    yes, at its simplest writing to the BSEG table is what DR/CR do in ECC Core, but to see only one table in a RDBMS is definitely an oversimplification. The basic rules of financials haven’t changed since Summa de arithmetica has been published, but the data volumes and complexity definitely have. stock markets, tax authorities, creditors, and last but not least owners cannot simply go to one table to figure it all out for themselves what’s in it for them as it is an impossible task, whether on premise, in cloud, via desktop or via their iPhones.
    also the volume of corrections issued by SAP ensures consistency down to the comment line if not executable code and a single point (.) can make it or break it as any ABAPer can attest.
    today’s multinationals are complex not only in their accounting or record keeping systems but in other areas like supply chains, marketing, procurement, research and development and what have you.
    often, you will find all vendors having presence integrated to some degree, but many times not and here’s where the opportunity is.
    i agree that replacing one ledger with another is a nonstarter, but accelerating the close, reducing the balance update refreshes, and serving it uniformly to whatever device checks in to query the info is what all the vendors and customers are after.
    SAP along with others is in the credibility battle as isolated proofs of concept don’t really fit any single large customer landscape. cloud will not resolve this problem, no matter where the data centers are, close to home or on the other side of the globe, but if we keep on trying we will eventually get it.
    these are my 3 Groschen but without opera.


    1. @greg:

      “accelerating the close” – how about availability in real time? (check Workday/FinancialForce)

      “reducing the balance update refreshes” – see above – there is no batch concept in the same way as there is in the on-prem world.

      “serving it uniformly to whatever device checks in to query the info” – see above…but seriously not sure if we’re talking the same thing but I see cloud player devs making sure the right data reaches the right device in the way the user needs.

      @kk – are you trying to convince me that SAP/ORCL/Infor etc DON’T support multiple code bases?

      More generally, I would encourage anyone who has lots of SAP/ORCL etc experience to really kick the tires of the current crop of cloud solutions with an open mind, test claimed benefits that arise from cloud ops, check for potential uniques that drive quantum value. As a hint, there is a reason why IBM has a 250 strong Workday practice that pretty much didn’t exist this time last year.


  3. @Den, I don’t necessarily agree with your point on one code base for all customers as it relates to cloud apps. This holds true for on premise packaged applications as well. Have customers enhanced the crap out of on premise applications?, yes, some of them have. But that’s just because the business processes required it or the implementations were totally misguided.
    I can argue cloud based apps offer lesser flexibility where you don’t want to customize. It’s no better than buying an off the shelf product
    I can also argue customers can just use services like SFDC as their data repository but build end to end custom applications themselves.
    I am not arguing other inherent benefits of cloud here, just to your point that cloud vendors have to deal with one code base and they can spend most of their time on innovating around this codebase. Every business thinks they are unique and they almost demand special set of apps and tools for them.
    I am with John here, it is still cloudy and unless there is a good adoption from large scale enterprises, I don’t know how this model will be scalable.


  4. i don’t really know what to do with statements like “just a means for posting” or “single line of code”, but i tend to agree with Dennis: jumping from an app to the suite is a leap of faith that most serious procurement organizations are not ready to make.
    having said that, a combination of cloud, mobile, and (surprise, surprise) social is becoming quickly the most important competitive differentiator for any enterprise system and may just be a Trojan horse that will help in breaking the walls of those “serious” platform enterprises.
    none of the MISO or AMIGOS is there yet.


    1. @greg:
      I didn’t pick up on John’s ‘just a means for posting’ remark. At its simplest, that’s exactly what financials are, and especially given the fact the underpinning model has been around some 600 years and isn’t going away anytime soon. But…and here’s the interesting bit – cloud provides business with new ways to imagine how, where, when and what that data can be used for and in what circumstances. So yes, you need Dr/Cr as we all do but a simple like for like replacement is not where the action lays. Would I prefer that data be available on an integrated basis? For sure because I don’t want to repeat the MDM mistakes of the past.

      As an aside, Scribe is doing some of this work in SAP/ landscapes.

      ‘Single line of code’ – what I mean is that the vendor only has to maintain a single code line for the application for all customers and not carry a library of customizations or multiple code lines. One of the virtues of the cloud approach is that everyone is (usually) on the current version of the core app.

      NetSuite for example provides a way for coders to build whatever they want (within reason) as mods using its SuiteCloud but those same devs never get to to touch the core.

      I’ll give another reason for choosing cloud that is emerging in unexpected but logical fashion: once customers become comfortable with the capabilities of cloud solutions, cadence of new version delivery etc, they start asking for multi-year agreements so they can lock down their financial exposure. I am seeing 3-5 year deals more frequently these days than at any time in the past. Yes and they come with all the usual caveats around data access, price hikes etc plus price haggles but the fact they are being requested speaks to how savvy procurers are looking at this topic.

      ‘Mobile first’ is rapidly becoming the way cloud players view their development modalities.


  5. Oh dear…John has missed the point somewhat and made some statements that are simply not correct.

    Players like NetSuite, Workday and dare I say SAP plus Oracle have not ‘cobbled together a platform’ but have very deliberately architected a platform for massive scale.

    You can argue has done the same with its offering. If you look, there are many industry specific and horizontal applications built on that seamlessly (and I mean they are just another tab) to a application. At the last count I think there are some 200,000 apps that sit on technology. Most will be pointless, quite a number are generating significant revenue,

    On NetSuite, I have seen whole manufacturing modules built. I even had a vendor come to me with a module for arms dealers – seriously.

    More importantly, the SIs who ‘get’ cloud integration are turning that into a factory style service as well so that they can operate a readily repeatable implementation experience that flexes with the work requirements. Try that in an on-prem waterfall gig?

    Now – does that mean you can flex, twist and bend one of the above solutions anyway you want? No, But as some of SAP’s largest customers will tell you, going to a vanilla implementation with minimal customizations is a better strategy than thinking you’ve got the lock on how an order is assembled (for example.)

    In today’s, (or is it tomorrow’s?) world, the suite may win, but it will be built upon a winning platform. And the apps of tomorrow will not look anything like the apps of today. They will be purposeful and use what went before as baseline functionality.

    Remember we are very early in the game. It took SAP 20 years to build the beginnings of a suite: R/3. It took NetSuite less than 7 years. Workday has spent 6 years so far and has HR (admin) + financials (still improving) for large enterprise. 10 years for sales/service clouds + a platform + a community of 200K *active* developers and tracking towards $3bn in revenue with $10 bn as the longer term goal.

    Profitability? A common curve ball in sales engagements but not one born out by stock prices. The fundamental difference between the on-premise sale and that of the cloud player is that once you have achieved what you deem critical mass for cloud solutions then you can turn off the marketing machine if you wish. The revenue streams keep flowing. That’s particularly true for back office systems. Plus, your cost of operation is low because you are (usually) delivering to a single code line. That means more innovation bang for your buck than is possible in the on-prem world. In the on-prem world, you can’t do that.


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