SAP Mobility solutions – Should SI’s play or stay on sidelines?


As many of you know – all my professional life, I have worked for System Integrators – both big and small. And as a result, every time there is something new in enterprise software, I am curious to see if SIs have any role to play , or whether they should just sit it out.  Of everything SAP has come out with in recent past – HANA is the one that got the most air time from SAP and the analyst/blogger community , but I think mobility is the one that will drive the most revenue for the ecosystem in short to medium term. It does not need a lot of convincing to do to get a customer to agree that mobile solutions are the future.

From the consumer side of the world – most mobility apps have typically been built by independent developers, and not by big IT houses.  For Enterprise side – especially for SAP – we need to think through if that is the model that will work exactly that way.  I am a big fan of SAP opening up platforms to developers – as long as developers can do cost effective development, protect their IP and make some decent money out of it.  And along with a bunch of similar minded people – I have been trying to push this message for some time at the highest levels at SAP.

But is there something here for SIs ? I think there is plenty of the mobility pie to go around. Here, I will ignore  the obvious stuff that SIs will do – the mobility strategy, device management , security and so on.  Those are important, but  don’t need added color.

For building and reselling apps – it is hard for SIs to compete on cost with independent developers if the platform is inexpensive.  BUT – Platform access is not inexpensive now – so SIs have an upper hand temporarily till SAP gets its act together. But I can’t imagine SAP not changing this in 2012.

But for the cost to work in SIs favor – they will need to find a killer app that can be resold many times over.  This usually needs the SI to create a few with the idea that some will click, and some will not. This is not consistent with existing SI business models. SIs have a big opportunity cost to consider – every hour spent developing such an asset is an hour they are not doing billable work. So it remains to be seen how many will jump in with both feet.  The bigger SIs probably will do ok – since they have significant abilities to invest, and can wait for longer pay back periods. But in general – I don’t see large number of SIs playing seriously on building such apps.  In everyone’s best interest – this is best done by independent developers, in my opinion.

For SAP systems – a big problem for building generic horizontal applications is that most backend systems are heavily customized.  A consistent abstraction to the outside world for non-SAP developers to use is not always possible.  So, even if a developer creates a generic enough mobile app – in most cases,  there will be a need to do some back end plumbing to get it all working in a useful fashion. This is the model I see evolving in the market from maybe 2013 onwards. Independent developers building the front end apps, may be even contracted by SIs to do so – and existing SIs doing the integration to backend.

Where I see big and small SIs both having a great advantage is building end-to-end mobility solutions for a specific client, especially where the SI has long standing experience.  Ideally – these should be vertical for an industry, and can be leveraged across many projects. This needs a large set of skills to come together – deep industry and sub-industry knowledge,  business process design, UX design, development in multiple technologies, basis, security, industrial strength testing and so on.  This is totally a sweet spot for SIs – and I would expect them to be all over this. And the beauty of this is that there is a production support opportunity right after the implementation, which is again a sweet spot for many SIs. The trick here is that this can and should be done for specific only very high value usecases – something where customer realizes significant value.

Now – for all this goodness to happen, there are a few things SAP need to play well too.

1. Make it easy for regular developers to use SAP platforms to build apps – not just the development, but the whole lifecycle of IP protection,  testing, certification, monetizing, maintenance, support and all that good stuff

2. Keep SAP Education on the front, and not the back of innovation. Unless the ecosystem comes up to speed on the latest greatest technology – it does not matter how cool the innovation is in the labs. Maybe even throw in some inexpensive education for select ecosystem partners. Basically – do what it takes to get partners/developers to trust SUP is the way to go, and get them away from everything else they are using today. This includes ironing out any wrinkles from existing software, and educating developers on roadmap for future.

3. Actively partner with SIs – and I expect this to be totally opportunistic depending on lay of the land – to push mobility solutions at the thousands of clients world over.  For significant mobility sales – the attitude of “Business gets it, IT doesn’t ” should be left checked at the door. IT gets it alright – and usually have valid concerns on security, scalability etc. Work with IT to address their concerns and gain their confidence.

4. By SAPPHIRE Orlando in 2012, have several customers come up and talk about their mobility solutions to the world.

5. Make sure licensing for customer is scalable and not a total rip off.

6. Try not to drown the mobility message with HANA and others

Will the economy hurt SAP? BofA/Merrill thinks it will, I seriously doubt it


Today morning, I saw this news  http://www.businessinsider.com/analyst-sap-headed-for-rocky-patch-2011-12 and then this article in Forbes ( written by someone in Forbes Staff, not advoice)  http://www.forbes.com/sites/ericsavitz/2011/12/16/sap-merrill-downgrades/?partner=yahootix

BofA / Merrill Lynch analyst Chandramouli Sriraman downgraded the stock from Buy to Neutral.  And when I checked the stock for SAP AG, it seemed to be trading about 2.6% down.

And few minutes ago, my buddy John Appleby defended SAP in his blog . http://peopleprocesstech.com/2011/12/17/sap-2011-results-analysis-the-awful-economy-is-really-going-to-hurt-financial-analysts/

Just a few days ago, I was in Boston,MA attending SAP Influencer summit. If anything, SAP executives were more bullish than usual – not less. And they have good reasons to be that way. SAP outperformed the industry, and had a great Q3.  SAP also has made significant investments into the future – in-memory, mobile, cloud etc.

SAP has some of the best sales leaders on the planet, and it shows in their results. The first year of its existence, they aimed to sell 100M of HANA . And they probably will. And remember, this is the 1.0 version of HANA – something that just supports datamarts, the simplest of usecases.  What I am trying to say is – it can only become better from here.  Now BW works on HANA, and they are building other stuff on HANA – and eventually they will make a strong enough case for HANA that it will pull in enough money to be a material contribution to topline.

Steve Lucas told us in a public forum at the influencer summit that we should mark his words that SAP will be number 2 database vendor in 2015 by revenue.  That is a pretty bold statement to make given the leadership Oracle, IBM and Microsoft has in that market.  Short of SAP saying their products will not work on anything else other than SAP’s own databases – I find it hard to believe SAP will become number 2 in database market. But Steve is an amazing leader – he is on target to sell 100M of HANA this year, which is no mean feat.  So he might pull it off. Seeing is believing, and I will be watching this space closely going forward.

Mobility has a good story too. SAP has not come out of the starting block quite as fast as they usually do for cloud. So they are in catchup mode for now. But with Success Factors acquisition, they should be able to catchup quickly and hopefully lead.

But the bulk of SAP’s warchest is filled from perpetual license revenue from on-premises software sale and maintenance. 22% maintenance is a gift that will keep giving for next several years. But what about new sales? I always thought this will have to die down. However, that is not what I am seeing at the moment. Several customers are still spending on big Business Suite, CRM and analytics  projects – mostly due to two factors. One – these companies had a spending freeze, and are now opening up their purses. And two – there is a lot of M&A and Divestitures happening due to macro economic factors, and these  need ERP spending.  So while it might not look like mid 1990s – I do not expect SAP to suffer really bad. And by the time Business Suite does slow down – Analytics, Cloud and Mobility should have become mainstream. It is SAP’s game to lose – and seeing the people in charge, I don’t think they will drop the ball.

There is a bit SAP can do too to help its own cause – which is in easing off the pressure on the marketing gas pedal a bit, and focus more on execution. If you look at the blogs and speeches that came out in 2011, you would think SAP is now making billions off HANA, not that 100M they were actually targeting 🙂 .

All said, the Merrill analyst is entitled to his opinion, just as SAP, Appleby and me are entitled to ours.  But any one analyst does not make or break a company’s performance in the market. What I am watching now is if any of the other big name analysts will post their advisory on SAP in line with the Merrill guy, or whether they will remain bullish.  I also wish these analysts substantiated their opinions with more research so that investors can make informed decisions.

SAP Influencer Summit – 2011, It’s all about the cloud


I almost missed the SAP Influencer Summit in Boston this year due to a last minute official trip across the oceans . But things worked out, and I managed to get back to Boston to attend the Influencer summit .  In fact the Lufthansa flight from Frankfurt to Boston had quite a few SAP folks – employees and bloggers and analysts.

 

Not the best timing for the event

 

Monday night, a few of us had dinner with Jim Snabe, SAP’s Co-CEO. Since that conversation is under NDA, I will pass commenting on it.  Hopefully in a couple of months, we should be able to discuss everything in more detail. We also caught up with Sanjay Poonen over drinks on Monday night, and had an enjoyable conversation on what is shaking in the SAP world. Sanjay is a no-nonsense executive, and is a pleasure to work with in these events. Being in a quiet period, there was very little he could tell us that we did not already know. Which brings up an important point – why hold a summit in December, so close to the Madrid SAPPHIRE if there isn’t a whole lot of new information that can be shared? Would it make sense to consider spacing these events apart so that SAP as well as influencers get some more value out of these interactions? Maybe February is a better time to do this than December.

 

Nothing new on HANA

 

Honestly, I was afraid there will be an overdose of HANA in this event.  Thankfully, that did not happen.  Both in casual conversations and well as in Keynotes and other official discussions – SAP focused less on HANA and more on cloud offerings.  On HANA – there really is not a whole lot more to be talked about, since the talk is already a couple of generations ahead of action . So I am totally a happy camper at this situation – and by SAPPHIRE Orlando in 2012, I expect to see solid execution.

 

Mobility and the “small” developer

 

We had a chance to sit down with Raj Nathan on Mobility topics. About 90% of the discussion was about the role small – as in independent – developers can play in this space.  I don’t know Raj all that well, but I came away impressed. Some one else in his position – possibly including me – would have hit his head on the table, and then kicked us out of the room 🙂  Raj gave us a patient hearing.  SAP gets it – they do understand that somehow they need to empower large droves of developers to create stuff on SAP. There is no push back on that from any of the executives. However, there is also no indication on how/when this will be done.

 

SAP is a big company, and mother ships do not turn on a dime. It is a big shift in how they work, and consequently it will take some time. But it is also theirs to lose if they sit on their hands for too long. There are two talent pools to attract – the couple of million existing developers in the ecosystem who work for customers and partners, and the untold millions who develop for others like Apple, SFDC and so on. The former is easier since they are captive, but this is a group which has limited ideas in general on mobile applications.  And for the latter, the deal needs to be sweeter than developing for Apple to woo them away.  It is not going to be an easy task for SAP.

 

SAP has done the right thing for HANA – Anne Hardy’s team has managed to give free access for 90 days to developers. This has been well appreciated by the developer community. However, to close the loop – a longer term plan that addresses cost, IP, monetization etc needs to be addressed quickly. And not just for HANA – but for Sybase, Gateway and everything else.

 

Here are a couple of videos that JDOD guys shot – that addresses these issues.

 

 

 

Cloud

 

Right from the keynote and through out the 2 days, SAP was on  message that they are serious about cloud. And they were out in full force. Peter Lorenz and Greg Tomb led the charge on cloud, and I must say they did an excellent job, despite all the constraints they had to deal with due to not being able to talk about SuccessFactors acquisiton.

 

SAP is going after all sizes of companies with their cloud offerings – right from B1 on the cloud for the smaller shops, to ByD for cloud ERP for medium shops, to LOB apps for existing instal base of Business Suite.

 

There was a lot of apprehension after SuccessFactors news came out on whether ByD will die. All indications SAP gave in Boston seemed to indicate that it will not die. SAP said it has not decided on Career OD, but that is probably just hedging comments till the SuccessFactors deal closes.

 

I especially liked Greg Tomb’s position on how SAP will go to market for OD . He is hiring hundreds of dedicated sellers for OD. Their incentives will be on bookings (unlike perpetual revenue billings) for OD alone. This is excellent, and assures focus on OD, since existing sales force might not want to waste their time on OD if they can sell the bigger ticket items in their bag.

 

Snabe mentioned that SAP is on target to hit 1000 ByD customers by end of the year. While that is impressive compared to what they have done in past, it is no where near impressive compared to SFDC etc in terms of growth. So with the new sales force coming in – I am curious to see if we see big increases in the OD footprint for SAP.

 

Where do partners fit in for SAP’s OD strategy. I don’t exactly know since I left early. However there are two logical areas for them to fit in. One is to build add-on’s to ByD and LOB OD solutions. The other is to build back end integration to On premises systems. With the SDK coming up next year, this is an area to watch. I will post updates as I find out more.

 

SAP seems to be making rapid strides on infrastructure side too, building out their data centers. If I understood correctly – Apparently with the exception of China where they will have hosting partners, they want to host everything OD themselves. Maybe B1 hosting will be done with partners too – I cannot make out clearly from my notes. Hopefully someone can clarify.

 

Sethu M, SAP’s deputy CTO, offered to show me the new S&P OD solution. But we could not match schedules and hence I did not get to see it yet. I am not convinced yet on feasibility of S&OP on cloud, but I am extremely curious to find more details. As soon as possible, I will get this info from SAP.

 

As soon as I landed back home from Boston, I saw the news of SalesForce buying Rypple, and getting John Wookey to run it.  Here is a short rant on that. https://andvijaysays.wordpress.com/2011/12/15/sap-gets-successfactorsdalgaard-sfdc-gets-rypplewookey-game-on/