SAP Announced Fantastic Q2 Results – And Vijay Says..


Good job – SAP, Kudos on having an awesome Q2. Those are impressive numbers indeed. An 18% jump in revenue is nothing to sneeze at, especially for a German company with a huge European market where everyone else seems to be suffering. Every region had double digit growth. What I loved the most was that average deal size was up. That is not something a lot of companies can pull off in a bad economy.

So where did all the money come from? Looks like HANA brought in more than its fair share. With Sanjay Poonen/Steve Lucas at the helm – I would not have expected any less. Their team probably would have also covered for Q1 misses if they had any, with some room to spare. Vishal would be a happy camper seeing the number of HANA customers rise.

I am seeing a lot of traction for BW on HANA in the field. Many customers have bought Hana licenses already – and several have done so before they have a finite time line for implementation. So consulting and HW business for partners would lag software quite a bit. But BW on HANA is the cheapest version of HANA now – and that alone is not going to make big numbers. Business Suite for HANA is probably going to come out by end of year – but I have my doubts on how many customers will make the switch in near future. RDS might see good traction since it lets customers start small with HANA.

Here is some color from my buddy Dennis Howlett – it is an excellent read. http://www.zdnet.com/sap-defying-gravity-whoda-thought-that-7000001501/

Dennis points out that SIs might see an issue going forward because SAP is aiming to reduce the consulting effort needed to implement its products. I am not going to hold my breath quite yet – time and again, across product lines – very few customers have been able to live with vanilla installations. RDS might help some – but probably not in sufficient scale. Even as recently as HANA – SAP could not scale implementations without partners getting involved. I strongly believe that had partner enablement been efficient up front, HANA would have sold about 2X what is has sold so far. Good thing is that it is all good now – and I expect to see more traction from HANA.

HANA is not a discounted product. However, big SAP customers don’t buy SAP licenses without discounts.HANA is not at a stage that large number of customers will just buy without a sweetened deal. So SAP sales people will need to throw something into the basket for sake of discounting. It is a game SAP taught customers, and now they cannot do away with it.

From Den’s post, my understanding is that SAP has taken the foot off the pedal for Analytics part of their portfolio. I wouldn’t worry too much about this . SAP has a very capable sales force that can overcome this quickly in rest of the year.

But there is an investment question that worries me a bit. With most of the development force dedicated to Hana – and SAP keen on bringing out several new products ( Visual Intelligence, Zen, Predictive Intelligence etc) – I have a feeling that the Analytics team are in a position of doing more with less resources. Despite million man hours, BO 4.0 had bugs that many customers have complained about. SAP has been pretty good about solving issues and supporting customers. However, it remains to be seen if SAP can allocate enough resources to effectively cater to the needs of such a growing portfolio. Alternate approach would be to not trying to be everything to everyone in BI. But I doubt Adam Binnie and Jon S and Michael R would want to take that direction.

Analytics has several options to increase market share. Most ERP customers don’t have BOBJ presence for starters, and it is a market SAP can readily tap. And Analytics is by far the only HANA usecase for now. So there should be some pull through demand too.

Mobility seem healthy too – but despite SAP spending a lot of effort, I somehow don’t get the comfort feel on their value proposition. I am not holding by breath on apps saving the day – or even platforms. Where I see traction is mostly in Afaria. I am seeing some traction for mobility – and some for SFSF, but not to the extent that I think that this will be the next billion dollar opportunity for SAP. I could be wrong – and I will be happy to be proven wrong. It could also be that Hana just gets more oxygen and Mobility messaging just chokes for now . I will wait for Sanjay to chime in with how he sees the future.

All things considered – I am bullish on SAP, and think that they are well placed for future. I can imagine a lot of champagne flowing in China this week where SAPPHIRE is happening 🙂

Not Even Apple Can Keep The Market Happy


So AAPL announced its Q3 results – and next thing we know its shares took a beating – almost down 5% in after hours trading when I looked. Did anything change fundamentally for AAPL to deserve this brutal treatment from investors? I doubt it – they are just paying the price for being a very successful public company for the most part. It is not as if they did bad in absolute terms – they made a lot of money in the quarter, but not enough to keep up with the market’s instiable appetite for more.

Their product cycle did not do AAPL a lot of favors – despite the excellent iPad sales, and a new mac model. Everyone I know – and me – are waiting for the new iPhone. Till next model comes out, large numbers of  existing customers will not pay for an existing model . It is not as if the analysts did not know it – they just did not cut AAPL any slack for it.

There is an interesting question here – how much of iPad sales is killing the traditional mac revenue? I know many who barely use a PC or Mac any more, and just use iPads. I have seen this more with ex-PC users. But this might be affecting mac buying behavior quite a bit too. I am sure some smart analyst has figured it out. I need to find out more. While AAPL is a clear leader with iPads,  the tablet market is getting brutally competitive. So they cannot slacken one bit on iPads .

AAPL has always been very conservative when it comes to guidance to market. It is now at a stage where Apple’s guidance and  analyst consensus is a few billion dollars apart for revenue each quarter. That is a lot of money to make up every time. Apple and Analysts need to reach some middle ground to avoid wide swings. It is hard to pull off though given AAPL’s success.

Some small investors will probably panic as always and sell now. My feeling is that some smart fund managers will just buy at the low price given the company has strong fundamentals and tonnes of cash.

AAPL might not be totally immune to economic issues in Europe – and that could be a long term issue. I would be keen to see how 4Q turns out for them. Guidance for 4Q is 34B USD – which is probably way too low for keeping analysts happy. I am pretty curious to see if they will revise it soon after seeing the stock take a hit.

 

 

Life And Career Lessons My Dogs Taught Me


I have always been a dog lover for as long as I remember. When I was a teenager, I spent all the time with dogs and dog shows and no time chasing girls. My mom and some relatives worried seriously that I would not finish my engineering education due to this extreme interest in dogs. That did not happen – and I thank an uncle of mine, N.Radhakrishnan – for that. He gave a life lesson – finish your education, get a good job that pays well – and you can buy any dog you want. And that is exactly what I did. With the first salary I got after moving to US, I bought a German Shepherd bitch from Germany and sent her to India, to my dear friend Dr.Satish Kumaran to raise and show. What uncle Radhakrishnan did for me – and I am not sure if even he realized it when he advised me – was life changing for me, and I never waste an opportunity to explain this to younger friends who are crazy about the world of dogs and dog shows. Sadly, my success rate is rather low in getting them to listen.

Dog training taught me a few things that have helped me a lot as a leader. I learned to work as a team – the hard way. I have lost more shows in obedience because I did not play as a team with my dog. But once I figured it out – we had a lot of wins, and even more fun. I carry this on to my work – I go out of my way to play nice as a team with my colleagues, and hardly have regretted it. I know plenty of people in my line of work who act as lone cowboys – and invariably they lack the endurance to keep at top of their game for long.

Dog show world is an ecosystem in itself. I was never a top competitor due to my college and later my work. But my mentors – breeders, judges and handlers – paid it forward by taking me under their wings. None of them hesitated to give me honest feedback, and even though there was very little I could do to help them, they always helped and continue to help me. This again is something that I have found to be a useful trait at work – pay it forward. I have Marilyn Pratt of SAP to thank for reinforcing this message from the time I have known her.

The dogs themselves taught me a lot about communication – and the ratio of punishment and reward. You get a lot more for your efforts by reward, and you get a lot less by punishment. It also taught me that rewards need to change according to situation – some times a treat, other times a game of fetch or tug-o-war. Punishment has its place too – and I learned that if you praise when needed, a change of tone in your voice is enough punishment for even the most difficult dog. Strangely – this seems applicable in work front too. While money is a terrific reward – and I do not believe that money can be a dis-incentive like some studies suggest – there are plenty of other rewards too. Training, new opportunities etc all are terrific ways of getting more from your team. I would not have put it to practice by just reading a book – I learned it first hand by training dogs, and the books just convinced me that others have reached similar conclusions too.

I always buy dogs from breeders – never from a pet shop. I would probably start adopting from shelters when I retire. And it has only helped me. Responsible breeders stay on to help for the life of your dog, and more. And while there are no absolute guarantees – the chances of getting a healthy dog of good temperament is much higher if you buy from responsible breeders. This has definitely helped me – the initial puchase price from a breeder is more than from a petshop, but that is the smallest part of what I pay over the life time of a dog. And this has influenced my buying behavior at work as well as on personal front. Buy from someone who is in the business for the long haul.

Now I have two dogs – 8 year old Golden Retriever we call Boss, and 3 year old black Labrador Hobo. They could not be more different. Let me give two examples. If I take them both to a dog park, this is what will happen every single time. I will throw a ball for them, and Hobo will start chasing it. Boss will run straight to the first human he can find, and will act all cute and get petted. He will then do this with every single person in that park. He will finish this socializing, and then will totally ignore other dogs at that time. Then he will go play with other dogs as if it is a part he just needs to do for sake of society. Then he is ready to play ball. Back to Hobo – who has been chasing that ball from the first moment he set foot in the park. He will reach within 10 feet of the ball, and will see someone else throw a frisbee. He will ignore my tennis ball – and chase that frisbee, along with the dog for whom it was thrown. He won’t get the frisbee either, because invariably he will chase another toy halfway through. Finally he will go back, fetch the ball I threw. By this time – he has no energy and is barely holding on to the tennis ball. Enter Boss – who will trot in an energy conserving smooth manner. He will run half way to meet Hobo, take the ball from his mouth, and bring it back to me. Hobo will reach me 2 minutes later and then will lay down with not an ounce of energy left. Boss will fetch without competition for a few more times and then he will call it a day before he gets tired.

Same thing happens when I toss a tennis ball to the pool for them to fetch. Hobo will dive spectacularly into the pool and get the ball. Boss will wait at pool steps, wait for Hobo to reach there – and will take the ball off Hobo and happily run back to me to repeat the fun exercise. Hobo almost never gets to deliver to me directly. This has gone on for three years, and I doubt it will change ever. So I try to not let them come play with me together all the time, so that they both get a chance.

I know people who are similar to Boss and Hobo in the human world, especially when it comes to work. And living with my dogs at home – I have gotten better at identifying how they work, and what I need to do to “manage”. I am sure you all can think of others who have something in common with what I explained above. Neither behavior is particularly good at work – but if you spot it as a leader, you have a chance to influence the modification of this behavior.

When people say “Dogs are the best friend of men” – I wonder if they thought of all these 🙂