And Vijay Says…

I saw the news on twitter yesterday night that SAP is buying Qualtrics for $8B cash – most of it financed .

I am writing this blog post strictly in my personal capacity and it doesn’t represent my employer’s opinions . I have no prior knowledge of this deal. I have worked in the SAP field for a long time and worked in SAP Labs for a short while as well.

My first reaction was “Wow – that’s an unusually bold move”. But then knowing SAP’s leadership team – I am not surprised they went with a gutsy – and perhaps unconventional- move .

I think SAP was over due for a large acquisition any way – like the BOBJ and Sybase ones. S4Hana seems to be doing very well indeed from what I see in the field, even though the ambitions about HANA itself being a leading general purpose data base by revenue didn’t exactly play out . While there is a lot of talk about Leonardo – it seems to be more of a packaging play than an actual software play. So it makes sense that SAP went for a big acquistion now.

S4Hana is mostly a defensive strategy to keep existing ERP customers within The SAP family . The real battle to be won is on customer and employee facing applications – and perhaps industry verticals .

SAP has long been a proponent of design thinking – and human centric design and all that . Their emphasis on “experience” seems to be something that their customer base seemed to appreciate too – especially with Fiori coming in . SAP obviously has significant IP on business processes as well over decades .

However – SAP has historically not taken a holistic approach to measuring experiences and more importantly the gaps in experiences . That needed custom work in projects if a customer wanted it – be it about customer , product , employee etc . So from that perspective – Qualtrics fulfills a high quality problem .

If there is one competitor out there that SAP badly wants to compete with now – that would be Salesforce. It’s a very large market and one that SAP once had a chance to rule . SAP did make some noise with C4Hana as their primary play and I don’t think that caused Benioff to lose any sleep. Qualtrics may be a useful addition from that perspective – though I doubt even that would get Benioff out of bed and worrying about next steps.

From the press release – I understand that combining experience data from Qualtrics with operational data from SAP is where the value is . I think that’s a fair statement. But for that to be a reality – the differentiation needs to come from specialized algorithms . SAP has bought some small ML companies in the past . If these XM + OM theory needs to be converted into practice – SAP probably needs to buy some more ML companies , hire more PhDs and license more IP – and maybe invest in some large university. All of it can be done and SAP has the money and brand to do it – but that will take time to materialize . I am very curious to see the next steps on this front .

When it comes to integrating existing tech with acquired tech – SAP’s track record is decent but not stellar. BOBJ gave SAP a lot of mileage as an analytics leader. But BOBJ products took a while to work on top of BW , and even today there is plenty of product overlap across their analytics portfolio . Closed loop analytics was a promise that didn’t materialize in a mainstream fashion across SAP portfolio . Sybase was bought with mobile as front and center – but eventually the database part was what proved to be more useful to SAP . SuccessFactors was a good Acquistion too and I first hand know customers who love it – but putting it all on HANA was a promise SAP couldn’t keep for a few years.

What could be different this time is that SAP has two new board members driving this – Enslin from cloud business and Mueller from Tech. If anyone knows how to get things done efficiently in SAP – it’s Rob. Mueller is an up and coming star and has Hasso’s blessings which means a lot in SAP’s engineering and product organization. So I think things may be a lot better this time .

The big question always is whether SAP paid more than it should have. They paid about 20 times the current revenue of Qualtrics. Qualtrics just started making a profit – and it is minuscule . I read they have been cash flow positive which is great of course. I also read that SAP will keep them as an independent business .

I am not exactly sure on the logic here.

It’s not a large earnings number to boost SAP’s numbers. They only have 9000 customers compared to something like half a million for SAP and my guess is that there is significant overlap of customer base . While Cross sell and up sell are always there – it’s still a small pond for SAP to fish. Independence might be needed to keep the acquired team intact, but I can’t see any reason why they won’t be folded in at the first opportunity given the relatively small size of the stand alone business .

Plus the whole value of the acquired tech is in integration with rest of SAP – which also beats the idea of keeping them separate. I don’t know enough about XM to venture a guess on how easy or difficult it will be to integrate with SAP. But that doesn’t worry me as much given the value is in data integration to begin with – and that doesn’t need integrating two platforms . But eventually for developers to get a productive experience – I would think XM seamlessly becomes a part of SAP cloud platform .

Could they have bought other companies for this money and had similar or greater impact ? XM is not unique in its category – survey monkey , Medallia etc are all good considerations too. And I also wonder if nearly the same impact could have been had by SAP buying multiple smaller companies – perhaps with deep ML capabilities , and then building extensive tech partnerships (and/or minority investments ) with the survey vendors .

A lot of assumptions go into modeling such deals and it’s hard to make a judgment from the peanut gallery on whether the price is justified or not . So while I don’t understand the logic fully from the outside – I have the highest regard for SAP leadership, and they are generally fiscally conservative – and hence I believe they arrived at what they thought was a justified price .

I look forward to learning more about this as the transaction closes and SAP makes roadmap announcements.

I was in midtown NY earlier this week and had a coffee with a young immigrant colleague who recently moved there. She asked me “How did you manage to survive here for so long ? I can’t seem to stop tripping over myself every step” . So I told her how my first week in this country played out – a story that might resonate with many others who came to this country at a young age.

I landed here by an Air India flight from Mumbai via London to JFK . And then I had to connect from LGA to Denver , and then by road to Colorado Springs . I must have flown at best 4 times in my life at that time – and never in an international flight. I was 24 at the time .

When I picked up my passport , Visa and $200 from TCS travel desk in India – I got some minimal instructions on what to answer the immigration officer , a warning that my connecting flight is from a different airport and so on . I was also told that if anything is hard to understand in the new place – the best people to ask are the cops in this country !

So I landed at JFK – goosebumps and all that – and the first words I hear from the immigration officer were “Is there anyone left in your village back home or is everyone here already ?”. This was directed to the guy from Guntur ( also from TCS ) who was immediately in front of me in the line . Goose bumps left me in a hurry 🙂

I got out of the airport – and the first guy I saw outside was a friendly Indian guy who told me his name is Hari. His speech went like this “I can take you to LGA – and it will cost you $200. Good thing you saw me – else someone would have cheated you”. I already knew from my research that he is quoting a high amount and decided to walk to the cop who was standing 20 yards from where we were . From the corner of my eyes – I saw Hari running like an Olympic Sprinter. The cop helped me get a cab and it only cost $30 or so to get to my connecting flight .

By the time I landed in Denver , it was really late at night . My manager who was supposed to pick me up hadn’t shown up . I had his phone number – but couldn’t figure out how to call him . Out of nowhere, a Hispanic lady showed up next to me and offered to help . She bought me a coffee, and using the change she got from the cashier – she called my manager from a pay phone , yelled at him at the top of her voice, and gave me the phone . He gave me instructions in a sleepy voice on how to get to Colorado Springs . The lady had already left by the time I turned around to thank her . I am convinced to this date that she was an angel !

In my infinite wisdom, I rented a car – only to find that it has no gear and no clutch ! And I couldn’t figure out how to roll the windows without the manual rotary control either . To make matters worse – for a few miles I drove on the left side of the road till I realized people drive here on the “wrong side”. I drove the car over a median and found my way to Colorado Springs and on to the motel 6 . One thing I vividly remember was a stretch of road where the street names were Arizona , California etc. i was quite impressed that US was so neatly organized that all it took for me to drive to California was to take this well marked street 🙂 .

The receptionist – Mr Patel – gave me a little package with the key and some paperwork and all . When I reached the room , I opened it and found no key in that package . I went back and woke up Mr Patel one more time . He patiently walked me to my room and showed me how to use the key card – which was pure magic to me ! I also couldn’t figure out how to handle the shower to get hot water – so I took bath by filling the ice bucket with hot water from the sink 🙂

The next morning I could not return the car to local Hertz location – after seeing cars whiz past me at 70 MPH. I waited till evening for lesser traffic to get to Hertz, and the manager even kindly waived the late fees . On the walk back to the motel – I waited 15 minutes to cross a Street because I didn’t know I had to press a button for the pedestrian signal to turn on .

First three days, I survived on McDonalds burgers – till a colleague who had been in Colorado for a long time took pity on me and took me home for a home cooked meal . His wife – who cooked that meal – was the second angel I met in 4 days . I don’t remember her name unfortunately, but the ONLY thing I brought back as a gift for someone on my next trip back from India was a Saree for her !

After three days I called my mom in India and told her that USA looked like India – there is no snow like we had seen in movies . It was June ! Snow did come – heavily – in August and I quickly realized it is a lot better to see snow in movies as opposed to dealing with it every day .

Thanks to my dear friend Kasi for sharing this photo of my first snow in Colorado Springs outside our apartment.

That weekend – another colleague invited me and a few other newly arrived young guys to his apartment for lunch. While we were eating, the door bell rang. His wife opened the door and it was a FedEx driver with a package for Mr Stevens . He had the wrong address – so the lady helpfully told the driver “Sir, there are no foreigners here in this apartment . Actually I don’t think there are any foreigners here in this entire community . We are all Indians here” . I will never forget the look on his face 🙂

Few weeks ago, I had dinner with an old friend in India . He is not a technologist and doesn’t have any background in services . We knew each other socially through a common hobby. The last time I saw him was some 25 years ago when I was in college. He asked me what I do in my line of work and the simplest answer I could come up with was “I am a problem solver”. He quite innocently asked me “And are you any good at it?” . We had a good laugh over beers 🙂

The question has stayed on my mind since then . To know if I am any good at it – obviously I need to define what good looks like. So here is what I think what good problem solving looks like – and I would greatly appreciate it if you could add your thoughts and/or challenge my thinking

1. Picking the right problem to solve

We are not short on problems to solve and there isn’t enough time in the day to deal with every problem that comes our way. So it’s critical that we choose which ones have the most impact if we solve them . Often the challenge is to keep reframing a question till you come up with a version that can be solved meaningfully

2. Ownership (or passion?)

The acid test of ownership for me is whether the intent is to find a solution against all odds or to default to find several reasons why the problem can’t be solved . Problems generally don’t age well – so if we don’t tackle them early, we usually are just going to get more grief later. I am not sure if passion is a better term than ownership in this context . The trouble I have with passion here is that I think it often gets in the way of being objective . On the other hand – some of the best solutions happen ONLY because the problem solvers were passionate .

3. Understanding

The difficulty with understanding is not usually a lack of data – but more of our tendency to see only what we want to see. Ability to listen well, poke at it thoughtfully and transfer it to deep understanding is quite hard in practice .

4. Effective dealing with people

All problems have a people angle and people are complex beings. And most problems need multiple people to solve . Every problem gets harder to solve if the problem solver cannot bring together the right people and get them to contribute . With experience , most of us become efficient about doing this – email , conference calls , slack etc all help. But are we really effective though ?

5. Structure

While we all like one grand solution to each problem – the reality is that most problems have multiple solutions . What’s right for short term may not be right for long term for example . If we don’t have a framework ( like perhaps MECE ) to solve problems – it’s hard to know when to stop. The flip side issue is that every framework has limitations too and overlooking those can be disastrous in some cases . Net net – some framework is better than no framework

6. Knowing when to stop

At some point – all solutions have diminishing returns . This can come in many forms. A classic example is “premature optimization” – usually found in larger companies. They tend to build a sales and marketing engine , complex metrics etc before figuring out if there is market fit to begin with . It could also be that another problem with bigger impact could show up and take priority over what you are working on . The ability to stay objective is crucial here to avoid significant opportunity cost

I would really appreciate your views on this