What does Apple’s outsourcing have to do with farming and manufacturing in Kerala ?


If you chop a tree for firewood, you should plant a tree to compensate. And you should do it even if you are not into the whole green thing. Or else you will be turning in your grave constantly when your children and grand children swear ad-nauseum about the trouble you put them in . But I digress.

So Apple outsourced a LOT of manufacturing to China. You should read this excellent NYT article http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=1&hpRT , and feeling depressed after reading it should be expected.

Does that make them evil – probably not. They are a profit seeking entity, and they sell all over the world. They can do whatever works for them. Did China win that work because of cheap labor? yeah – they probably did. But the manufacturing did not flourish there solely because of cheap labor. It flourished because China has plenty of engineers, built an ecosystem around Apple’s manufacturing needs and then started offering that service to other companies. And then other innovative companies started investing in China to build manufacturing. The story repeats in concentric circles – and it seems to fuel itself.

Did America lose out big because Apple outsourced manufacturing? yeah – I guess it did. But Apple was not the first to do so. And neither is manufacturing the only thing that got outsourced. But did America get anything in return? yes of course. We can now walk into mega marts and buy things a lot more cheaper. We can walk to an Apple store and buy an Apple product much cheaper than if it was manufactured locally.And so on and so on.

So is this a fair trade off? hardly, in my opinion – if what is happening to farmers in Kerala is an indication.

Kerala, my home state in the southern tip of India, literally means “land of coconut palms”. And Kerala is a place where people eat rice in some form 2 or 3 times a day. When I was young – the state had a large number of vast rice fields and coconut plantations. Around the time I was in high school, this was not the case any more. Many farmers moved from growing rice and coconut to growing rubber. Rubber was a “cash crop” which fetched handsome prices from tire manufacturers etc. Fast forward to today. Keralites still eat rice and coconut based food 3 times a day, but they have to buy these (and most vegetables) from neighboring states for a huge price. And rubber values fluctuate so much that not many farmers got rich that way. As agriculture declined, the problem was compounded by lack of supply chain efficiencies in buying and storing food grains and vegetables. End result – farmer suicides started happening in an accelerated manner. Many of them lost their land and fortune and their loved ones. And prices still go up significantly most years.

While Keralites are extremely enterprising and capitalistic when they live and work outside their state, they are mostly left leaning when they live in Kerala. Manufacturing has steadily declined in the state, and it has become a consumer economy for the most part. The state has 100% literacy, and has extremely high standards for health, higher education etc compared to many other Indian states. But despite all of this – manufacturing won’t flourish there. Both parties (well, alliances of convenience is a better phrase) that typically rule Kerala are left leaning to various degrees, and both have strong trade unions which actively discourage manufacturing. Except for IT, I think everything else in Kerala that generates money has a union presence that threatens its existence. This environment is the prime reason why lots of Keralites get out of the state after their education, and live and work outside. I am one such guy too – who finished college and could not wait to get out of there. Due to many people leaving the state, there is a positive side too – these people send a lot of money back to their families that live in Kerala. So the consumer economy generally has always been excellent.

When I read the article on Apple’s outsourcing to China, the situation of Kerala is what rushed to my mind immediately. The long term implications are stark – once you let go of something you do well, you have to be prepared to pay the price. And you should be able to invest in something else to compensate for the long term repercussions. It is the price to pay when economy takes a global flavor. You cannot pick up your toys and go home arbitrarily when you don’t like the game after some time – you need to stay in the game and invest wisely for future. Globalization is not exactly a bed of roses – it is a mixed bag.

IT outsourcing is something I am very familiar with. If a company outsources some IT functions and uses the savings to invest elsewhere, it works great. If it just eats up the savings, and don’t invest elsewhere – it just won’t survive in the long term. Outsourcing might create other kinds of jobs too – like Apple being responsible for increased demand for AT&T etc and creating jobs there. Or the outsourcing companies in India creating jobs in the US when they want to get into high end consulting etc. Apple has a large consumer base in China – and makes money in that market. One day when tax laws make it attractive to bring that money to US, Apple might do that – and it will help US economy. It is pretty hard to judge – at least for me – on how much these indirect benefits will offset the long term costs. But at a minimum, it does offer some relief.

Outsourcing of manufacturing and IT and other things won’t go away – although in an election year, many might say it will. The question is how will we compensate for the long term impact ? There is no one magic bullet – it needs a lot of things to fall in to place – on both public and private sector. And sadly, it might not get much traction in US till the presidential elections are over.

SAP – ECC is catching another wind. Are we ready?


I don’t think I have seen another time after the mid to late nineties when the market was this hot for SAP.  Several companies seem to be in a hurry to do big SAP projects again . And no – they are not talking of big HANA projects, or big mobility projects or big cloud projects. Drum roll please……They are talking about the good old on premises ECC projects – FOR REALS! It is like the mainframe – it never dies, and always catches another wind.

This does not mean no one cares about HANA, Mobility etc. All these customers have plans for all the innovative stuff as part of their projects, but they are not front and center in projects unlike in the keynotes we see from SAP leadership at SAPPHIRE and Teched.  HANA and Mobility experience will probably be an additional differentiation for SIs trying to win the implementation work.  Along with ECC, some of the other business suite systems like CRM and SRM are also showing up prominently in these projects. I expected some of these companies to consider cloud solutions for ERP – SAP or otherwise. But big customers did not seem to have that kind of faith in cloud ERP as I thought. Maybe it needs a few more years to catch on.

There are probably a bunch of reasons for this surge – investment money kept away in last 2-3 years is now being spent,  increase in M&A and divestiture activities , economy is slowly recovering and so on. There are a bunch of interesting challenges that go with this too.

1. Experience of leading and working in huge global projects

Not many PMs and team leads  in today’s SAP world have the big implementation experience. People who did those in nineties have generally gone to senior leadership positions in SIs and clients, and new generation will need some mentoring.  Unless you have done it yourself before – it is not easy to plan and execute a blueprinting session when you have 120 countries in scope. and blueprinting is only the start. So far, I have not seen anyone asking for a global agile SAP implementation, but I am betting that I will hear that one day soon.

2. Quality and quantity of Business Suite experts

If what I am seeing is the beginning of a big trend that will last 2-3 years atleast, then it remains to be seen if SIs and customers can keep up with the demand for project resources – both on quality and on quantity. Education needs will surge, and I wonder if education needs can be met effectively in large scale

3. Architecture challenges

Unlike the 90s where BDC and ALE ruled, the world has changed quite a bit on technical front. ABAP has moved by leaps and bounds, and a modern day architect has many options, and many challenges. Question is – do we have enough people who can design and create big complex systems from scratch that use modern SAP technology in grand scale?  And will modern SAP technology withstand this test of scale?

SAP is pretty serious about getting number 2 position in DB market by 2015. If these big projects can be convinced to switch from ORACLE, MS and DB2 systems – that will be a great start to make this goal. Somehow, I don’t feel like holding my breath on this quite yet. But I am going to keep a close eye on this, and will start asking customers from now on whether they feel good about switching their DB .

4. Does SAP still have enough people with deep core business suite knowledge ?

When a large number of big business suite projects start, there is always a tax on SAP – the number of trouble tickets will increase. I would think SAP’s developers are now mostly focussed on HANA and other new stuff. Will SAP have enough people who can take care of a flood of messages? Even though SAP Business Suite software is way more mature than in 90s – big projects will always have big problems that need deep experience from SAP to solve.

5. What about all the innovation agenda items?

My friends from technical side will appreciate this for sure – what will happen to all the cool innovations when a large number of configuration experts (referred to by names like  SPRO jockeys ) take over a project, and push tech stuff to the wall? Will HANA and Mobility and Cloud stand a chance? or will they all become a phase 2 item? The only one where I see some light is on BI. Over time, a lot of functional folks have realized that it is probably better to give some attention to their BI colleagues.

There is a silver lining here. It gives SAP enough breathing space to make the innovative new products more robust by the time the big projects are ready for them to be used in prime time. There would not be a risk of licensing revenue loss since SAP license sales usually happen as a market basket, and not a la carte.  So HANA sales, mobility sales etc can still show a healthy upswing while projects focus on business suite.

6. Do customers still have sufficient inhouse expertise to run the big gigs ?

Best SAP projects happen when customers pair consulting firms with strong internal resources. But over time, most of these experts move into management, or move to other companies, or their jobs get outsourced etc.  So I would imagine a lot of hiring will happen in 2012 for staffing internal roles. And that typically means some solid staff from consulting companies will switch employment soon, and then these firms will have to do some firefighting.

That is just the few that rushed to my mind – and there must be a hundred more to talk about. Feel free to post your thoughts in comments. It is going to be very exciting to live through a series of big projects again.

2012 looks likely to be a good year for SAP Business Analytics, as long as it works on iPad


As always, I started the year picking my customers’ brains on what they would like to see happen in 2012 in their companies.  I also checked in with a few colleagues to make sure what I am hearing is not isolated. These are all long existing SAP shops. I will restrict this post to discussions around BI to keep it brief.

 

It is kind of funny that every one of them said BI is top priority, and that they won’t do it anymore unless it worked well on iPads ( I hope they meant tablets in general, but literally they all said iPad) .  One executive mentioned he does not care for iPad and that he needs his information on iPhone.  Ease of development and deployment are pretty high on the agenda. I pointed everyone to Steve Lucas’ blogs right after I read it. I have not checked back for reactions yet.

 

Since I know the future of Xcelsius is a hot topic for my friends on twitter, I probed a little on that topic. Surprisingly – no one seemed to care a lot about Xcelsius itself working on iPad. They know the flash issue, and they all think SAP will do something to get them mobile BI. No one seemed to think SAP will just kill Xcelsius in a hurry either – they all firmly believed that if it were to go away, it will be a while later, and that they can migrate over. One CIO said – “I couldn’t care less about any given tool – all I need is good clean up to the minute information to show up for my users on their mobile devices. How a vendor makes it work is their problem, not mine”.

 

For a change, I did not have to tell any one about HANA – instead, customers have now started picking my brains on HANA.  Today, after the SAP news on 160 million euros coming from HANA came out – I had 3 calls back to back from customers who wanted to do HANA. These are all people who shied away last year – and now they think it should have matured enough to give it a try. 2012 should see some significant traction on HANA – especially with BW .  So far no one has told me they want to do a production BW on HANA, but they are willing to do POCs. That is not abnormal – most of my customers are significantly risk averse.

 

I was not surprised to hear the interest in BPC on HANA. I first hand know of customers who did not do BPC due to performance reasons. And now these folks are all happy to do POCs on BPC running on HANA the earliest they can.

 

But none of it is exactly new – more or less these just confirmed trends that I (and probably everyone else) knew and predicted. What was new – practically the first time customers actually brought it up seriously with me – is collaboration on BI.  Many of them went through budget cycles recently – and complained bitterly that despite having had BI and planning solutions for ever, they still needed a lot of excel spreadsheets and manual intervention to make it work.  And if I understood correctly – what they disliked most was the inefficient collaboration within the organization when it came to adhoc activities in planning.  As one exasperated friend told me last week at the airport  “if it is this hard to collaborate with people you see and talk to daily, is it any wonder that our vendors and customers find it painful to deal with us?”.

 

One BI manager and one controller  brought up “actionable” BI. The point was fair “SAP and SIs have all told me for years about actionable BI. But till date I have hardly seen any actions that directly originate from BI” .  Closed loop BI needs to get out of white papers and blogs and into customer sites – it is about time.

 

So I guess 2012 is starting on an optimistic note on SAP Business Analytics front – but we just need to make sure all the stuff works on iPad 🙂