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  • Showing posts with label SAP. Show all posts
    Showing posts with label SAP. Show all posts

    Wednesday, April 17, 2019

    Google Getting Serious about Enterprise IT

    This just in: Google has just announced hiring of Rob Enslin as President of Global Customer Operations for its Google Cloud unit.

    Why is this a big deal? Because Enslin only in the past month announced his departure from SAP, where he spent 27 years and was most recently in charge of SAP's entire cloud portfolio. He was also a member of SAP's executive board.

    Enslin will be reporting to Thomas Kurian, who was recently hired on by Google as the CEO of Google Cloud. Kurian, of course, was highly regarded during his 22 year career at Oracle, where he was most recently the President of Product Development. He was also the brains behind Oracle's Fusion line of cloud applications, which represent Oracle's future as a cloud applications services provider.

    Kurian writes:
    Today, it is my pleasure to introduce Robert Enslin, Google Cloud’s new President of Global Customer Operations. Rob’s expertise in building and running organizations globally, business acumen and deep customer and partner relationships make him a perfect fit for this crucial role. Rob will report to me, and he starts on April 22. Rob spent the last 27 years at SAP in leadership roles across sales and operations, most recently as the President, Cloud Business Group and Executive Board Member. He developed and managed SAP’s entire cloud product portfolio, led the field revenue and enablement efforts across multiple geographies, and oversaw core functions including professional services, ecosystem, channel, and solutions. Rob brings great international experience to his role having worked in South Africa, Europe, Asia and the United States—this global perspective will be invaluable as we expand Google Cloud into established industries and growth markets around the world.
    Just today in a private message a fellow analyst said, in another context, that the "enterprise software boat is being rocked." I replied that it needs to be rocked, and maybe it needs to be capsized.

    Perhaps Google getting serious about enterprise technology is just what the market needs. For now, Google's immediate objective appears to be to take on Amazon and Microsoft for cloud infrastructure services. But with hiring of Kurian and Enslin, will Google also start moving into enterprise applications? Or will it be content to just be a platform provider>

    Watch for who are the next new hires. That will give us a clue.

    Monday, January 23, 2017

    New Customer-Facing Systems Extend the Reach of Small, Midsize Businesses

    Small businesses play a vital role in the economy and are often the leading innovators in new products and services. According to the U.S. Census Bureau, organizations with fewer than 500 workers account for over 99% of businesses, and companies with fewer than 20 workers make up nearly 90%.

    But small business doesn’t always mean simple business. Like larger companies, small and midsize businesses (SMBs) need to reach new markets, develop new products, satisfy customers, and control costs. The main difference is that SMBs need to do these things with fewer resources.

    In recent years, however, software vendors have announced new products to address the challenges facing small businesses. This post outlines two of them.

    Read the rest of this post by Strativa consultant Dee Long: New Customer-Facing Systems Extend the Reach of Small, Midsize Businesses

    Sunday, October 05, 2014

    Workday’s Goal: Tier I Cloud ERP

    Aneel Bushri, Co-Founder, Workday
    Mention Workday to anyone involved with enterprise applications, and the first response will probably be something about cloud-based HR systems. A few might also mention accounting systems.

    It is becoming increasingly apparent, however, that Workday’s ambitions go beyond human capital management (HCM) and financial management systems. From briefings at a recent Workday analyst summit, I conclude that Workday intends to become the first Tier I cloud ERP provider.

    What is Tier I ERP?

    The term “Tier I ERP” has been bandied about for many years. It is generally understood to refer to the largest ERP vendors that are able to serve the largest and most complex global businesses. Fifteen years ago, there were several players that could arguably be members of that club. But because of industry consolidation only two vendors remain that fit that definition: SAP and Oracle.

    I am convinced that Workday wants to join that club, and it wants to join it as a cloud-only provider. SAP and Oracle may be moving as fast as they can to cloud ERP, but they will forever be, at the most, hybrid providers—offering both on-premises and cloud versions of their systems. Workday, in contrast, intends to be the first Tier I cloud-only provider.

    Evidence of Workday’s Ambition

    There are several things that point to Workday's objective.
    • Tier I customers. Unlike NetSuite, which leads the cloud ERP market in terms of number of customers, Workday from its very beginning has been targeting large companies. I noted this way back in 2008 with Workday's wins at Flextronics and Chiquita. Since then, it hasn't stopped, signing one Fortune 500 customer after another. For example, in 2013, it won HP, with 300,000 employees in 111 countries. This year it closed Bank of America, which is now Workday's largest customer. Moreover, its big company wins are not limited the US. For example, Workday recently sold Nissan and Sony in Japan and Philips in the Netherlands. Our most recent research at Computer Economics shows that Workday's typical customer is so large that it stands head and shoulders above all other cloud ERP providers.
       
    • Tier I functionality. The functionality of Workday's HCM is now approaching that of Oracle and SAP, as it builds out its global footprint. It currently claims customers live in 177 countries, with 27 offices worldwide. Translations are provided for 25 languages. Outside of the US, it still relies on payroll partners, but it is building out its own payroll for the UK and France. Its Financial Management product has now reached 100 customers. It just announced a new embedded financial reporting capability (Composite Reporting) that promises to do away with a whole host of spreadsheets and data warehouse reports that large companies typically rely upon. 
       
    • Tier I cloud platform. Workday has also been building out its cloud platform into one that can handle the demands of the world's largest enterprises. It is moving its infrastructure to OpenStack, a set of open source components and architecture for software-defined data centers. This makes Workday's platform less proprietary than it has been in the past. Moreover, large companies need assurances of system availability and reliability. Therefore, like leading consumer Internet services, Workday is building its platform to quickly detect and recover from failure in any infrastructure component. Taking a page from Netflix, it will soon be randomly turning off components in the production environment as a way of ensuring its ability to recover. Phil Wainewright has more on the latest developments with Workday's infrastructure. 
    Some observers view Workday as less than an ERP provider, as it only provides HCM and financial management systems. But they ignore the fact that Workday has already moved beyond these functions. It already provides purchasing, expense management, and project management functionality. It also includes embedded business intelligence capabilities that embrace data inside and outside of Workday. In one sector in particular--Higher Education--it has already pushed into operational systems, with its launch of Workday Student.

    Can other functional areas be far behind? Workday's CEO Aneel Bushri made a telling comment at the end of the analyst summit, "Financials are the door to everything else," he said. "After you see us land large financial deals, you will see us moving into other areas: maybe healthcare, which is mostly workflow, plus patient accounting and billing. Layer on top of that strong analytics. It might be a year or two from now, but not five years out. But right now, we can't spread ourselves too thin."

    This mimics the evolution of most other ERP providers over the past two to three decades. SAP, Oracle, and many others started as accounting systems. Once they were in the door, they then became the natural choice for expanding into operational systems in other functional areas.

    Avoiding Side Streets

    At this point, Workday has no lack of opportunities. In fact, one of the problems it faces is that there are simply too many good ideas that it could pursue. But if I am right that Workday's goal is to be the first Tier I cloud ERP provider, it cannot afford to take its eye off the ball.

    Here are some of the ideas where Workday is saying no:
    • Platform as a service (PaaS). Most of the leading enterprise SaaS vendors also offer a platform for their customers to extend the vendor's system or to build their own complete standalone systems. Salesforce.com with its Salesforce1 platform is the prime example. In its recent user conference, Oracle CTO Larry Ellison criticized Workday for its lack of a PaaS.

      But Workday is taking another path. First, most user development is for reporting, and Workday excels in its embedded business intelligence capabilities. Second, its applications are highly configurable, which diminish the need for customizations. Finally, where customers truly need to do new development, Workday offers an "integration cloud" to allow customers to build applications on other platforms, such as Salesforce1, and have them interoperate with Workday.  With a number of other good platforms offered by other providers, it is difficult to see the drawbacks to Workday's approach here.
       
    • Commercializing Workday's cloud platform. As noted earlier, the capabilities of Workday's cloud platform are approaching those of large consumer cloud platforms, such as Google's or Amazon's. It is robust, scalable, and fault-tolerant. It is difficult to think of another enterprise software provider that can accommodate the number of simultaneous users in a multi-tenant environment and a single application code line. After Workday's briefing update on its technical architecture, I asked, "At what point do you commercialize this platform?" By this I mean, either to allow other SaaS providers to build on a separate instance of Workday's platform, or to license the platform for them to build upon and operate themselves. The short answer was, never say never, but Workday would rather focus on building applications.
       
    • Manufacturing industry functionality. Manufacturing companies represent the largest industry sector worldwide. Nevertheless, Workday executives are adamant that--at least at this time--they do not plan to develop manufacturing business systems. In part, this may reflect the founders' experience at PeopleSoft, where their attempt to gain market share in manufacturing never gained traction. Way back in 2003, I wrote a post, PeopleSoft Is Tired of Being the Best Kept Secret in Supply Chain Management, which highlighted just how good PeopleSoft was in manufacturing and supply chain. But PeopleSoft never broke through in a big way.

      The other reason, I believe, is that manufacturing is simply a bridge too far from where Workday is today. Most of Workday's target markets today have one thing in common: they are sectors where people are the dominant costs--Financial Services; Professional and Business Services; Higher Education, Software and Internet Services; Government and Non-Profit; Healthcare; and Hospitality. These industries are best for leveraging Workday's roots as an HCM system provider. Workday could change course at any time, but right now, the leadership team feels that chasing product-based businesses would be a distraction.
    Strategy is all about choices: deciding what not to do is as important as choosing a goal. Workday has no lack of those offering free advice--worth every penny!--and I've given my share in the past. Its leadership team is to be commended for keeping its focus.

    What's Next?

    If Workday's goal is to become the first Tier I cloud ERP provider, expect to see Workday begin to build out functionality to more fully serve its target industries, like it is doing with Workday Student in the higher education vertical. I'm speculating here, but it might mean merchandising systems for retail or revenue cycle management for healthcare.

    Will Workday make major acquisitions to fill out its industry solutions? I don't think so. Its  acquisitions to date have mostly been for technology (e.g. Cape Clear) or what I would call capabilities (e.g. Identified). Any acquisition of business applications would need to be rewritten for Workday's platform, and I sense that Workday would rather start with a clean slate in developing new functionality. Workday's approach also allows it to build upon a single object model for each key entity, such as "person," rather than interfacing entities between acquired software. Workday's approach is another point of contrast with SAP and Oracle, which have built up their cloud portfolios largely through acquisition of disparate vendors and are now facing the challenge of integration.

    There is another contrast with SAP and Oracle. Workday has a tremendous advantage in that all its customers are on the latest version. Its architecture with a single code base ensures it will never have legacy customers to support--another demand on a vendor's resources.

    The Tier I ERP club today only has two members. But a third member may be joining sooner than we think.

    Related Posts

    Best Practices for SaaS Upgrades as Seen in Workday's Approach
    Workday Making Life Easier for Enterprise Users
    Workday Pushing High-End SaaS for the Enterprise
    Workday: Evidence of SaaS Adoption by Large Firms

    Wednesday, August 20, 2014

    A Guide for Cloud ERP Buyers

    In working with clients over the last decade, I've watched as cloud ERP vendors have been steadily encroaching on the territory of traditional ERP providers. As a result, ERP selection projects today are more and more becoming evaluations of cloud ERP providers.

    However, buyers need to realize not all ERP systems that are labeled “cloud” are the same. To help buyers better understand these differences, I've just completed a new report for my research firm, Computer Economics, entitled Understanding Cloud ERP Buyers and Providers, based on my experience in selection deals as well as extensive analysis of vendor offerings over the years.

    Figure 2 from that report sums up the differences:

    In brief:
    • Cloud-Only Providers: These are the “born-in-the-cloud” ERP vendors that do not have an on-premises offering and include such companies as NetSuite, Plex, Workday, Rootstock, Kenandy, FinancialForce, Intacct, and several others. These tend to be newer, smaller vendors (although Workday and NetSuite are each in the range of $500 million in annual revenue). Because cloud-only vendors have a single deployment option, they each can focus their entire business—from product development to sales to implementation and ongoing support—on the cloud. As a result, they make fewer compromises and tend to deliver the maximum benefits of cloud solutions in speed, agility, and scalability.
       
    • Traditional ERP Vendors: These are larger, more established providers such as SAP, Oracle, Infor, Microsoft, and a number of others. They are growing more slowly than cloud-only providers. They have more complex businesses as they have to support their on-premises customers as well as their hosted or cloud customers. Because they have developed their solutions over many years or even decades, their functional footprint tends to be more complete than those of cloud-only providers.
    There is much more in our analysis of the cloud ERP market, which describes these two major categories of cloud ERP providers in more detail. In addition, the report also segments cloud ERP buyers into two categories: first-time buyers looking for their first ERP systems and established companies replacing their legacy systems. As it turns out, generally speaking, these two categories of buyers have different pain points and different criteria driving their decision-making. 

    At this stage of cloud ERP market maturity, each of these provider categories has its advantages and disadvantages, and there is no one right answer for a given buyer. Organizations considering cloud ERP need to carefully consider their requirements, their choices, and what tradeoffs they are willing to make. We, therefore, conclude with recommendations for buyers looking at cloud ERP. We also have some advice for providers that seek to serve these two types of buyers.

    As a practical aid to buyers, the full report includes two lengthy appendices, which provide profiles of the key ERP vendors of hosted and cloud solutions today, along with an assessment of their market presence. Cloud-only ERP providers profiled include Acumatica, AscentERP, FinancialForce, Intacct, Kenandy, NetSuite, Plex Systems, Rootstock, and Workday. Traditional ERP providers with cloud/hosted solutions include Epicor, IFS, Infor, Microsoft Dynamics, Oracle, QAD, Sage, SAP, Syspro, and UNIT4.

    Related posts

    The Cloud ERP Land Rush
    Computer Economics: Choosing Between Cloud and Hosted ERP, and Why It Matters

    Thursday, July 17, 2014

    SAP's Revamped Strategy for Small and Midsize Businesses

    Dean Mansfield
    SAP announced today the launch of a new division focused solely on sales of its systems to small and midsize businesses. The SMB Solutions Group will be headed up by Dean Mansfield and will focus on companies with up to 500 employees. Moving against the tide, Mansfield comes to SAP from NetSuite, where he headed up global sales and operations.

    Product Strategy: Simplified Suite on HANA and Business One

    What I find most interesting in the SAP press release is its ambiguity on what products Mansfield will be selling into the SMB market. The first part of the announcement appears to be saying that SAP will target the SMB market with a cloud version of its Business Suite, though it does not say so explicitly: 
    Mansfield will execute on a board strategy to redefine the SMB business solutions market by creating the next generation of simplified, integrated business applications powered by SAP HANA®, delivered via the cloud that will solve tomorrow's complex SMB business challenges. 
    The announcement then explicitly mentions Business One (a separate system from SAP's Business Suite), which will continue to be sold and supported through partners. It also refers to a push to move those partner offerings to hosting on HANA, as a separate deployment option for SMBs:
    In addition, Mansfield will lead the current SAP Business One application portfolio, which will continue to operate through the Global Partner Operations organization, and plans to accelerate the adoption of SAP Business One, version for SAP HANA, as well as the SAP Business One Cloud solution, version for SAP HANA. 
    What's missing from the announcement? Any mention of SAP Business ByDesign (ByD).

    This lack of clarity about the products that SAP will offer to SMBs was also picked up by one analyst in SAP's quarterly earnings call. Adam Wood from Morgan Stanley, noting that SAP appears to have deemphasized ByDesign, asked SAP CEO Bill McDermott what would be the main product focus in SAP going to market with SMBs.

    McDermott responded, in part:
    ByDesign is still part of our product portfolio and we now have ByDesign on SAP HANA, which is absolutely a game changer because everything is faster and better on HANA as you know. [Emphasis mine.]
    McDermott is a careful speaker, and his use of the word "still" is revealing. He wouldn't dream of saying, "The Business Suite is still part of our product portfolio," or "SAP HANA is still part of our product portfolio." The word "still," therefore, indicates that ByDesign is not part of SAP's core strategy.

    McDermott continued:  
    We also believe strongly that Business One has been going through an indirect channel now and has proven itself to be a very successful, high growth, double-digit business with good margin. So we will continue that. But we also put B1 up on HANA in the Cloud and we go global and we think that can be a very serious category killer.

    Once it get into the market place and people see what it can do on HANA and we will continue innovate in that space now with a defined agenda underneath Dean Mansfield. So it's a combination of things we are going to go after the market with.
    So, this confirms the implication in SAP's announcement that, in contrast to Business ByDesign,  Business One is strategic to SAP's SMB strategy.

    Without directly using the words "Business Suite," McDermott then implied that the Business Suite itself, running on the HANA Enterprise Cloud, would also be a product offering for SMBs:
    Related to the HANA Enterprise Cloud and the multi-tenant debate, the bottom line is the HANA Enterprise Cloud and each customer wants their solutions. They want it beautiful. They want them to work and yes, we can make money on it because HANA is the great simplifier.

    When you radically simplify the IT stack--I mean SAP
    [in context, the SAP Business Suite--ed] used to run on eight terabytes of data. Now it's like closer to 1.5. You dramatically lower your cost of operation and improve the speed of everything in the operation. So it's perfect for "Run Simple." It doesn’t matter whether it's single- or multi-tenant. What matters is the customer gets what they want at the price point in the performance and the user experience they're looking for, and that's precisely what we intend to give them.

    Will SAP's SMB Strategy Work? 

    I would interpret SAP's strategy as two-fold. For really small businesses, starting at even five or 10 employees, SAP wants to continue its reseller channel strategy with Business One. For small divisions of larger companies, especially those already running its Business Suite globally, SAP will also position Business One, whether on-premises or hosted by partners.

    For midsize companies, especially those that are growing and need more comprehensive functionality, SAP wants to position its flagship Business Suite. But this product has not performed well for midsized businesses in the past, even when packaged with preconfigured industry templates as SAP All-in-One, due to its size and complexity. SAP is betting that it will be successful with its "Run Simple" strategy to turn this product into a "Simple Suite." This is what McDermott was talking about when he mentioned going from 8 terabytes to 1.5. And, by running it as a managed service on the HANA Enterprise Cloud, SAP hopes to simplify the implementation and ongoing support experience for SMBs.

    In my view, there are two risks in SAP's strategy and they both involve the Business Suite. First, even if "simplified," will midsize businesses find the Suite simple enough? The early signs with SAP's Simple Financials are promising. But is that possible with the rest of the Business Suite? Second, will the experience of the HANA Enterprise Cloud be as friendly as the cloud-only ERP providers, such as NetSuite, Plex, Rootstock, FinancialForce, and others?

    In recent years, SAP had a cloud-only solution in Business ByDesign that was more directly comparable to the competition. That's no longer part of the plan. Rather, SAP believes that a combination of Business One and a simplified Business Suite will be a winning strategy. Time will tell.

    Update, 5:22 p.m.: Removed references to Business One on Hana Enterprise Cloud (HEC), which does not appear to be part of the solution. Thanks to Dick Hirsch for the clarification.

    Update, July 18: Dennis Howlett picks up on my post and provides more analysis, including a history of ByD.

    Related Posts

    Fighting Complexity: Can SAP Run Simple?

    Wednesday, June 11, 2014

    Fighting Complexity: Can SAP Run Simple?

    When it comes to enterprise software vendors, SAP wants to be not just the largest but also the most simple. That’s the message behind SAP’s new theme, “Run Simple,” rolled out at its annual SapphireNow user conference in Orlando last week.

    At first glance, the theme of simplicity is an odd one. For over 20 years, SAP has been widely regarded as having software that is functionally rich but enormously complex. Its name has become synonymous with implementation projects that run into the tens, even hundreds, of millions of dollars, sometimes ending in failure or at least in organizational exhaustion. SAP is easy to stereotype.

    Newly appointed to the sole CEO role, Bill McDermott set the tone in his kick-off keynote: SAP customers need to “fight complexity,” to simplify how they interact with their customers, starting with how they deal with their own workforce. At the same time, McDermott acknowledged that SAP itself has been part of its customers’ complexity. But n

    McDermott is an inspiring and disciplined speaker. But fulfilling this vision will take more than an inspiring keynote. In my view, if SAP really wants to beat complexity, it will need to run simple in three ways: in its products, in its ongoing support, and in how it deals with its customers. So, let’s look at each of these.

    Simple Finance the First Step toward a Simplified Business Suite

    On the first day of the conference, SAP announced the future delivery of Simple Finance. As I see it, Simple Finance will be a major new release of SAP financial applications (starting with FI and CO) as the first SAP Business Suite products to undergo radical code optimization to take advantage of HANA, SAP’s in-memory database technology.

    Based on interviews and a demonstration I received on the show flow, I see at least three ways that Simple Finance is, well, simpler.
    • A simpler code base. Under HANA the applications can now simply record transactions and not have to create any summarized data fields for later reporting. With HANA, reporting always goes back to the source data in memory to build aggregated data fields on the fly. This shrinks the size of the programs, greatly reducing the number of lines of code, making them less error-prone and easier to debug. It also means that users can now drill down from summary data to details in any way they choose, without having to write special reports or customize the code.
       
    • A simpler user interface. SAP Fiori provides the user interface for Simple Finance. Fiori apps operate across desktop and mobile devices to provide a simplified user interface for SAP’s applications. They are not just a new presentation layer but in many cases combine SAP transactions into a single user process. For example, entering a manual payment in Accounts Payable can now be done in a single screen instead of the multiple screens it previously required in SAP. On a side note, after much push-back from customers, SAP announced that Fiori apps will now be delivered at no charge to customers under maintenance, removing one barrier to adoption of Simple Finance.
       
    • Simpler to implement. Implementation tools and methodologies are built right into the application, based on SAP’s previous work with its Rapid Deployment Services. These include wizard-like tools to guide and configure the applications. There are data migration tools to map data from existing systems into Simple Finance—whether from previous versions of SAP or from other systems. Implementation testing is also managed within the system itself. In addition, Simple Finance is integrated with SAP’s collaboration system, Jam, to encourage knowledge exchange. If a user runs into problems, for example, he or she can reach out to other users for help.
    A date for general availability of Simple Finance has not been announced, only that early ramp-up customers are about to start implementation. Following Simple Finance, other parts of the Business Suite will also be “Simplified” until the entire product becomes a “Simple Suite.”

    SAP personnel demonstrating Simple Finance appeared genuinely excited about the product. One indicated she was slated to work on implementations with early adopters. She said that she had even signed up some ramp-up customers earlier that day on the show floor, indicating a high level of interest.

    I am optimistic that new prospects will find Simple Finance much more attractive than older versions of SAP financial systems. Simple Finance will be better received by midsize organizations that might have been otherwise scared off by the size, scale, and perceived complexity of SAP Business Suite. Score one for SAP.

    My take: product simplification is the most straightforward mandate facing SAP. For the most part, it is only a technical challenge. SAP is loaded with software engineers, and HANA does represent a new paradigm for how business systems are architected. This is not to say there won't be bumps along the road, but I am hopeful SAP will get there.

    Cloud Deployment Simplifying Ongoing Support

    SAP also wants run simple in how customers keep their applications up-to-date. Like most traditional on-premises vendors, the majority of SAP customers are not on the latest releases of its products. The reason is that applying new versions (in SAP lingo, “enhancement packs”) is often a labor-intensive activity—testing the new code, retrofitting any customizations, regression testing to be sure nothing gets broken, and migrating data.

    SAP’s solution is to take over these responsibilities by hosting customers’ systems in SAP’s HANA Enterprise Cloud (HEC). This program, already rolled out to some early SAP customers, is essentially a managed services offering in which SAP takes all responsibility for day to day operation of the system in SAP’s own data centers. Notably, SAP also takes responsibility for keeping the customer’s system up to date with the latest enhancement packs and bug fixes. It even supports systems with custom modifications.

    The managed services offering should allow the customer’s IT personnel to focus less on technical aspects and more on business process design and effective use of the system.

    My take: simplifying SAP’s ongoing support by moving customers to its managed services offering
    will be more of a challenge. Only a tiny fraction of SAP’s customers are committed to this offering today. There is likely to be much inertia in SAP’s installed base about having SAP host their systems. Even though customers may be experiencing pain, many will view migration as short- term cost and effort for long term benefit. It may all come down to how SAP prices its managed services offering. If existing customers do not take up SAP on the offer, they will not experience much simplification in their SAP support experience, and SAP will retain its reputation for complexity.

    Many other vendors have tried this approach—in particular, Oracle. Although most customers of Oracle Fusion Applications (Oracle’s next generation apps) are reportedly choosing the hosted deployment offering, I do not believe Oracle is seeing a mass migration of its preexisting applications, such as E-Business Suite, Siebel, JDE, or PeopleSoft, to its hosted delivery model. Will SAP’s experience be any different? I have my doubts.

    Making SAP Simple to Deal With

    The third way in which SAP must run simple is in its customer-facing processes. How easy is it for customers to deal with SAP? McDermott did not spend as much time in his keynote on this point, but he did emphasize it toward the end.

    “Run Simple is more than a slogan for SAP--it is an organizing principle for our company,” he said. “We'll ask the tough questions: do our products and technologies run simple? Does our customer experience run simple? Are we empowering our employees to run simple? And are we enabling our customers and our partners to run simple? If not, hold us accountable.”

    He continued: “For customers, we're committed to a beautiful user experience. We will make it simple to do business with SAP: simple pricing, pay-as-you-go in the cloud, simple web experience.”

    Those are big promises. Anyone who has negotiated an acquisition of SAP software knows that SAP contracts are incredibly complex.  Pricing is opaque, with many various types of named users defined for each product. SAP’s terms and conditions around indirect access (when other systems access information from an SAP system) are onerous.

    The result is that it is nearly impossible for an SAP customer to be fully compliant. When SAP does an audit of a customer’s use of SAP products—which it has the right to do—it will find problem, if it looks hard enough.

    Even finding the right person in SAP's organization to deal with is not a simple matter. Whether it is the result of having a worldwide organization or peculiarities of German corporate governance, it is difficult to understand who reports to whom, or who is responsible for what.

    Lars Dalgaard, founder of Successfactors, recently commented about SAP’s organizational problems.  “[SAP has] this messed up reporting structure where nobody reports to anybody,” Dalgaard said. “It’s this German thing where I didn’t even report up to Bill [McDermott] myself, I was reporting to the Supervisory Board. That doesn’t work. It just doesn’t. I mean, the COO doesn’t report up to the CEO?”

    Dalgaard was positive about McDermott’s new role, however. “Someone has to be the decider, and with Bill, now they’ve got a decider on the job, I can tell you that,” he said.

    The complexity of SAP’s organization not only affects customers; it affects anyone who has to deal with SAP. Talk to SAP partners, third-party developers, SAP suppliers, and industry analysts—nearly all of them say the same thing. SAP’s organization and decision-making processes are extremely difficult to navigate.

    Following McDermott’s recent appointment to the role of sole CEO, SAP underwent a major reorganization, laying off an undisclosed but apparently significant number of employees. SAP claims this was not to cut costs but to better align the organization with SAP’s strategy. If so, the reorganization could be consistent with an attempt at simplification.

    My take: SAP’s organization and customer-facing processes will be the most difficult to simplify. Technical simplification is an engineering problem. Support simplification can be solved if SAP can motivate customers to take up its managed services offering. But making SAP simple to deal with requires cultural change.

    SAP’s culture manifests itself in how people are measured. One example: why did it take an outpouring of customer wrath for SAP to release Fiori at no charge to customers under maintenance? One source close to SAP told me that, within SAP, product groups are measured by their impact on revenue. If there is no revenue from Fiori, there is little recognition for Fiori developers. I have to believe that many SAP executives understood the opportunity in delivering Fiori at no charge. Some of us have argued that SAP stands to make more money by delivering Fiori at no charge (because it pulls through greater revenue opportunities with HANA and additional user seats). So, why wouldn’t SAP make this move sooner? If my source is correct, it is because that general lift in revenue would not be attributable to Fiori.

    When you change program code, the program doesn’t fight back. But when you try to change a large organization, the organization often resists. Having a sole CEO will help, and McDermott appears determined. But has there ever been an example of a large organization that has become less complex over time?

    What Does “Run Simple” Mean for Enterprise Tech Buyers

    Large tech vendors change their marketing messages periodically, with no change to their core strategy, values, or culture. Is “Run Simple,” merely a branding exercise, or will it be a reality in how customers experience SAP? Time will tell.

    In the short term, Simple Finance deserves consideration. In looking for new financial systems, business leaders who might have otherwise dismissed SAP as too complex should take a look at Simple Finance. New and existing customers should also investigate SAP’s managed service offering. But be prepared for continued complexity in dealing with SAP.

    SAP did not become a complex organization overnight and it certainly won’t be easy to simplify. McDermott specifically told customers in his keynote to hold SAP accountable. I hope they will do that. I also hope McDermott will follow up in next year’s user conference with a progress report.

    Related Posts

    What Fiori Means for SAP and Its Customers
    Risks and Opportunities with SAP's Platform Economics
    Mad as hell: backlash brewing against SAP maintenance fee hike

    Monday, April 21, 2014

    What Fiori Means for SAP and Its Customers

    https://www.youtube.com/watch?v=M1CtjY7hsDM
    Over the past several months, analysts and bloggers have been debating about whether SAP should offer its new user apps, Fiori, at no charge to customers under its maintenance program.

    The debate can be difficult to follow for those not familiar with Fiori or SAP's technology stack. This post summarizes the debate, including factors not often recognized, along with my view on what SAP should do in its own best interest and what it all means for SAP customers.

    What is Fiori?  

    SAP Fiori is a set of apps, newly written by SAP, that address the most broadly and frequently-used SAP functions, such as workflow approvals, information lookups, and self-service tasks. They provide simple and easy-to-use access seamlessly across desktops, tablets, and smartphones.

    To get a quick idea what Fiori is all about, watch this short video with examples of SAP Fiori apps for managers, or click on the image on the right.

    Fiori is more than just a new user interface. It is a set of cross-device applications that allow users to start a process on their desktop, for example, and continue it on a tablet or smartphone. SAP is developing its Fiori apps based on its latest user interface framework, SAPUI5.

    SAP lists three types of Fiori apps
    1. Transactional apps, which allow users to perform SAP transactions on mobile devices, as well as desktops. For example, there is a transactional app for creating a leave of absence request and another for approving a purchase order.
       
    2. Fact sheets, which display information about key business objects in SAP. For example, there is a fact sheet app for viewing a Central Purchase Contract, which allows a user to also drill down into related entities, such as vendor contacts, items under contract, and terms.
       
    3. Analytical apps, which allow users to display key performance measures and other aggregate information about the business.
    A complete list of all the current Fiori apps is available on SAP's website. At the time of this writing, SAP has released two waves of Fiori apps, of 25 apps each, with additional waves underway.

    It is important to note that Fiori will never be a comprehensive UI replacement for SAP.  In a back channel conversation, I learned that most SAP ERP processes cannot be done with Fiori, now or in the future. Those SAP processes are simply too complex in their design and do not lend themselves to deployment on a smart phone or tablet. Everyone knows, for example, that you can do a lot more with the desktop version of Netflix than you can on the Netflix iPhone or iPad app. Likewise, it is difficult to take a complex SAP process and dumb it down to the point where you can deploy it on a smartphone.

    Complicating things, Fiori is not the only development effort involving SAP's user interface. SAP has also released a product dubbed Screen Personas, which allows users to customize standard SAP screens to their liking. For example, using Personas, a user could remove fields of no interest or change the placement of fields on the screen.

    SAP Customers Are Pushing Back on Pricing for Fiori

    The best source of information on the debate about Fiori pricing is a diginomica post written by John Appleby, an SAP expert who works for an SAP partner, Bluefin Solutions. Some of what follows borrows from Appleby's post and its long comment thread. 

    The list price for Fiori is currently a one-time fee of $150 per user and it gives that user access to all current and future Fiori apps. That might sound like a good deal, until you consider several factors. First, as Appleby points out, that $150 per user fee can add up quickly. If a user only needs access to one or two Fiori apps (e.g. approvals), the $150 fee gets expensive in companies with thousands of such users. In the comments, Jarret Pazahanick points to one company that has 80,000 employees and would have had to pay $12M simply to let all of its employees view their pay stubs using Fiori. Nevertheless, Appleby points out that there are scenarios where Fiori is easily cost-justified such as when enabling the salesforce with a number of Fiori apps: the $150 fee per user is a no-brainer in such cases.

    But, more basically: what are customers paying maintenance for? SAP's current maintenance pricing is 22% of the customer's license fee, which means that, in fewer than five years, the customer has essentially purchased its entire SAP product portfolio a second time. Customers look at Fiori as an extension of the SAP products they have already licensed. Why should they have to pay more money to SAP in order to license Fiori? 

    As Chris Kanaracus found when he interviewed those in leadership positions from three major SAP user groups worldwide, SAP customers are up-in-arms over SAP's policy of charging them for Fiori. It's reminiscent of the customer revolt against SAP's forced march of customers to higher levels maintenance fees a few years ago. It is also reminiscent of SAP's struggles with how to charge for its mobility platform and the SAP Netweaver Gateway, back in 2011.

    Strangely, SAP's policy toward existing customers appears to be harder than it is toward new customers. Back channel conversations indicate that when SAP is selling net new deals, it nearly always demonstrates Fiori--because it shows really well. When it comes to putting together a proposal, then, SAP typically bundles Fiori as part of the total deal. 

    Yet, when an existing customer wants to buy Fiori, that customer needs to pony up $150 per user. The exception, of course, is when the customer has something else it wants to buy from SAP. Then SAP can wink and nod and bundle Fiori into the deal with the other SAP products the customer is buying. In other words, unless you are willing to buy something more from SAP, you have to pay for Fiori.

    Other Vendors Provide New Functionality at No Charge

    Some on Twitter have argued that SAP's policy is no different than that of other vendors. I disagree. Some other vendors have a much more liberal approach to delivering new functionality to existing customers under maintenance at no additional charge. For example, Workday recently rolled out a new user interface, and previous revisions added extensive mobile support. Workday didn't charge its existing customers extra for this new functionality.  Salesforce did something similar with its Salesforce1 platform, a major new release of its Force.com platform--at no additional charge.

    Furthermore, it is not just the pure cloud vendors who provide new functionality at no additional charge. For example, Microsoft Dynamics recently announced major new CRM functionality at no additional charge to existing enterprise users (the top tier of users). This was not a user interface upgrade but totally new functionality from acquired products: a complete marketing automation system, from its acquisition of Marketing Pilot, a social media listening system, from its acquisition of Netbreeze, and a new service desk system, from its acquisition of Parature.

    Finally, releasing new functionality at no charge already has precedent within SAP. For example, in 2012, SAP released a new product known as HR Renewal, which encompasses learning, employee and manager self-service, personnel administration, organizational management, and more. All of this was provided at no additional charge to customers under maintenance. See this blog post from Jarret Pazahanick for details (including the comments). I see no logic in how SAP can charge customers for Fiori, while releasing HR Renewal to existing customers at no charge.

    But...Paying for Fiori is the Least of the Problem

    The argument to this point is simple: customers are paying maintenance on existing SAP products, and Fiori is an enhancement to those products. Therefore, SAP should make it freely available to customers. This was and is my position. But, as it turns out, for most SAP customers who want Fiori, that $150 flat fee per user is the least of their problems. There are two other obstacles to Fiori:
    • Fiori needs current releases of SAP products. Some years ago, SAP introduced the concept of enhancement packs, whereby customers could selectively apply upgrades to individual SAP products instead of installing a completely new release. This approach is good: it lets customers can more easily install only the updates they really need or want. But it also means that many customers will not be completely up-to-date on all enhancement packs. Therefore, when a customer wants to install a Fiori app, the customer may first need to upgrade to a more current version of the product and install certain enhancement packs. Depending on how back-leveled the customer is, the upgrade can be a major effort. The prerequisites for each Fiori app are listed on SAP's website.  
       
    • Fiori needs HANA. Sometimes lost in the debate is the fact that, to use Fiori, customers need to be running HANA underneath their SAP products. SAP explicitly says that HANA is a hard requirement for Fiori fact sheet apps and Fiori analytic apps. For transactional apps, SAP says, somewhat cryptically, "They run best on an SAP HANA database, but can also be ported to other databases with acceptable performance." A back channel conversation with someone in a position to know, however, says that without HANA, Fiori transactional app performance is slow on mobile devices and, as a result, may not deliver a positive user experience.
    Neither of these are small issues. One source with direct Fiori experience reports that the biggest problem is the effort required to upgrade SAP products and the expertise required to install Fiori. What percentage of SAP customers have all the upgrades and enhancement packs in place for Fiori? It is impossible to determine, but it cannot be a large percentage.

    Another source points out that slow adoption of HANA is a major impediment to Fiori. Out of approximately 40,000 SAP Business Suite customers, only about 1,000 have bought Business Suite on HANA, and SAP doesn't say how many of them are live on HANA. Even if all of them are live on HANA, that is less than 3% of Business Suite customers. Charging for  Fiori is "a small barrier" in comparison to the need to implement HANA.

    SAP Could Make More Money By Giving Away Fiori

    So, if the price tag for Fiori is the least of customers problems, why not turn it around and ask, what would it mean if  SAP were to offer Fiori to existing customers at no charge?
    • It would give a positive reason for SAP customers to upgrade to HANA. The real opportunity, in my opinion, is not some small amount of revenue SAP might receive from sales of Fiori to existing customers. It is in moving those customers to HANA.

      SAP has staked its entire product strategy on HANA. Yet, as we have just shown, fewer than 1% of Business Suite customers have purchased HANA. If SAP wants to be successful, it must do everything it can to move customers to HANA. Yet, the business case for Business Suite on HANA to date has mostly been, in effect, "you can do things faster." Yes, there are a few dramatic examples, such as large companies being able to do a complete MRP regeneration in seconds instead of hours. But for most customers, "faster" is not enough to justify the time and expense of a HANA migration.

      Fiori changes that. SAP can now say, if you go to HANA, you can change the user experience of SAP with these Fiori apps. Fiori, in effect, could be the trojan horse for HANA.
       
    • It would sell more SAP user licenses. The only individuals who can use Fiori apps within a customer's organization are those who have a user license for the underlying SAP product. Fiori, therefore, may tip the scales in favor of getting more users licensed for SAP products.

      As Appleby wrote:
    I don’t have any facts to support this, but it makes sense from a strategy perspective. Fiori Launchpad hosts multiple Fiori apps for a given person. If I’m a sales rep, then I could have approvals, accounts, and a bunch of other things. Each of these apps requires some user license of some kind....

    If users are using Fiori, they will want new capabilities too, and those new capabilities have a sell-on, but only if people are using Fiori. Get customers on it, and get the account team in to sell-on.
    Compared to the strategic value and revenue opportunities for moving customers onto HANA and selling additional user licenses, charging existing customers for Fiori is chump change.

    SAP Has It Exactly Backwards

    In summary, charging for Fiori is a big mistake for two reasons. First, it annoys customers, who need to see more value in SAP's maintenance program. True, it is unlikely that any single customer is going to migrate away from SAP simply because SAP is charging for Fiori. But SAP's stated policy reinforces the perception that there is not much value in SAP's maintenance program. SAP's most recently quarterly results show that SAP's core business--sales of its Business Suite--are shrinking. SAP, therefore, should be doing everything it can to keep the customers it already has.
     
    Second, SAP in practice already gives away Fiori when it is part of a larger deal. As discussed earlier, nearly every Fiori deal to existing customers is by definition going to be a larger deal, either because the customer will need to license and implement HANA or because the customer will want to move additional users onto SAP in order for them to use Fiori.

    In a subsequent email discussion, Appleby asks:
    How can SAP positively motivate customers to move to SAP's innovation stack (HANA, Fiori, Hana Enterprise Cloud, etc.). This is where the good stuff will happen. Why isn't SAP bundling these three things together including the services to get customers there? Why doesn’t SAP take some of the risk up front to keep its relevance?
    Taking it a step further, if Fiori is part of the key to moving customers onto SAP's latest technology stack, perhaps SAP should by paying customers to take Fiori, rather than charging them for it. The payment could be in the form of a moderate credit toward new user licenses or HANA licenses. Or, as Appleby proposes, a discounted bundle of products and implementation services.

    Such a program would generate much good will among SAP's installed base and would further SAP's larger product strategy.

    SAP Customers Should Investigate Fiori Possibilities

    What does this mean for SAP customers? First, get up to speed on the Fiori apps currently available and show them to your end users. Long time SAP users are often jaded in their expectations, which means the bar is set pretty low. They will most likely be pleasantly surprised by the possibilities of Fiori. Screen Personas are another way to impress long-time SAP users with new possibilities. If they become supportive of Fiori and Screen Personas, they may give you the business case to make an investment.

    Second, spend some time to determine what additional investments you will need to implement Fiori.  If you are like most SAP shops, you will need to upgrade some SAP products. You will also probably need to migrate at least some portions of your Business Suite to HANA. Or, at least you will want the option to do so if Fiori performance turns out to be unacceptable without HANA. You may also need some additional SAP user licenses.

    Finally, talk to your SAP account representative about putting together a bundled deal for Fiori, Screen Personas, new user licenses, and the other technologies you will need, including HANA. Despite SAP's stated policy to charge for the new apps, it is likely that SAP will be quite willing to cut an attractive deal when there is a larger amount of money at stake. 

    Update: Dennis Howlett had a post on diginomica last week where he delves into some of these same points.

    Update, June 4, 2014: Better late than never. SAP, responding to pressure from its customers, announced during its annual user conference that Fiori apps and Personas will now be available to customers under maintenance at no charge. 

    Related Posts

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    Wednesday, February 19, 2014

    The Cloud ERP Land Rush

    Oklahoma Land Rush
    For those unfamiliar with US history, in 1889 the US government opened unoccupied lands in Oklahoma to settlement. Settlers could claim up to 160 acres, live on and improve the land, and then legally obtain title to it. Such an opportunity led to a land rush, in which thousands of settlers raced into Oklahoma to make their claims.

    Today, cloud ERP is like Oklahoma in 1889, mostly unoccupied land, and there is a race as cloud vendors rush in. NetSuite and Plex were two early settlers. Today NetSuite has more acreage (number of customers), while Plex has fewer acres but more development of those acres (functionality)--at least in manufacturing. Cloud-only providers such as Rootstock, Kenandy, AscentERP, Acumatica, Intacct, and SAP (ByDesign) are also in the race. Traditional providers such as Microsoft Dynamics, Infor, Epicor, Oracle, UNIT4, and QAD have also entered the land rush, although they are moving more slowly, as they need to pull wagons full of their traditional on-premises software along with them.

    In the larger suite of enterprise applications, such as CRM and HCM, the land rush is further along.  Salesforce for CRM and Workday for HCM have already staked out large claims and are rapidly developing them. But Microsoft with Dynamics CRM, SAP with SuccessFactors, and Oracle with its Fusion HCM are also adding to their acreage. Core ERP functionality, on the other hand, is earlier in the land rush. There is still a lot of open territory with a lot of unclaimed land.

    FinancialForce Staking Its Claim

    One provider that is clearly in the land rush is FinancialForce, which today announced new branding to signal its claim in cloud ERP.

    The company is now referring to its suite of enterprise applications as FinancialForce ERP. The new branding is necessary because FinancialForce long ago ceased to be a provider only of financial management systems.

    FinancialForce previously added professional services automation to its portfolio and late last year acquired Less Software, which provides inventory management and order. Vana Workforce is another acquisition from last year, which adds human capital management (HCM) functionality.  FinancialForce also added its own functionality in areas outside of financials, such as advanced quoting and revenue recognition. With this broader footprint, FinancialForce now qualifies as a cloud ERP provider.

    Building on the Salesforce.com platform, FinancialForce has direct integration to the Salesforce cloud applications as well as to all of the other providers in Salesforce's AppExchange marketplace. The recent evolution of this platform to Salesforce1 gives FinancialForce additional capabilities for building out its mobile deployment options.

    How many acres will FinancialForce claim? The signs are hopeful. The company is reporting strong results: 80% growth in its revenue run rate, and 62% growth in headcount year-over-year, bringing it to over 260 employees globally.  FinancialForce now has customers in 27 countries with users in 45 nations worldwide. By all accounts, the company is on a strong growth trajectory.

    Plenty of Land for Everyone

    The economic and strategic benefits of cloud computing accrue to end-user organization that completely or at least largely eliminate their on-premises IT infrastructure.  Our research at Computer Economics shows that cloud user companies save more than 15% in terms of their total IT spending, and the money that they do spend goes more toward innovation and less towards on-going support. But it is difficult to move away from on-premises infrastructure if an organization's core ERP system is still on-premises. Therefore, the move to cloud ERP is essential if organizations are to fully realize the benefits of cloud computing. You can move your CRM and HCM systems to the cloud--but if you are still running on-premises ERP, you still have one large foot stuck in the old paradigm.

    In my view, there does not need to be one clear winner in cloud ERP. Just as there were dozens of on-premises ERP vendors in the 1990s, especially when sliced by industry sector, there is plenty of room for many more cloud ERP providers. There is plenty of land for everyone.

    Related Posts

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    Thursday, February 06, 2014

    Enterprise Software: Suites Don't Always Win

    The major enterprise software providers promote their pre-built integration as a selling point in capturing new business from existing clients. They argue that, rather than attempting to integrate different systems from different providers, organizations should buy everything from a single provider and get the integration for free.

    Why the Integration Story is Getting Old

    But do suites always win? In my software vendor evaluation work, I've noticed that the integration story is not resonating with buyers as it once did. I think there are several reasons for this.
    1. Vendor suites may not be as well integrated as vendors claim. This is especially true when the vendor's suite comprises pieces that they acquired. Both Oracle and SAP have made many acquisitions over the past decade. Is the integration of these piece parts really seamless? In some cases, yes. But in many cases, no.
       
    2. Integration an IT-priority, not a business priority. Many software selection projects these days are being led by business users. This has always been desirable, but it is especially true when you get outside of core ERP to systems such as CRM, supply chain management (SCM), and human capital management (HCM). IT leaders generally put a high priority on integration because it makes their job easier (notwithstanding point #1). Therefore, when IT leads the vendor selection effort, integration rises near the top of the selection criteria. When business units lead the selection, they tend to rank process alignment, ease of use, and maximizing adoption higher than they do integration with back-end systems. Whether rightly or wrongly, business leaders often say to IT: we want System X--make it work.
       
    3. Integration has gotten a lot easier. The integrated suite story was more convincing 20 or even 10 years ago, when the choices for integration were either brittle point-to-point flat file interfaces or complex middleware or integration hubs that required substantial investment before the first integration could be built. Today, application programming interfaces (APIs) and web services make integration a lot easier than it used to be in the past. SaaS providers, in particular, have gotten very good at integrating with other systems, whether cloud or on-premises, as this is a common requirement among their customers. So, the problem has gotten smaller.

    4. Not all integration points are equally critical. In a recent CRM selection, the incumbent ERP vendor made the claim that there were something like 300 integration points between the vendor's ERP and CRM systems. Did the buyer really want to program all these touch points between ERP and some third-party CRM provider? It's a good sales pitch. But when we investigated further, we found that there were really only a handful of integration points that really mattered to this customer. For example, if pricing only changes once a year, is it really necessary to have the CRM pricing tables automatically updated from the ERP pricing tables? Investigate your real needs for integration and often you will find they are much less than your incumbent vendor will claim. 
    In addition, think about the benefits of not having all of your enterprise system "eggs" in one basket. True, there are benefits to having fewer vendors in your applications portfolio. At the same time, it is possible to have too few--to grant too much power to a single vendor. Behind closed doors, suite vendors talk about how much "share of wallet" they have among their customers. But is it in your best interest to have so much of your IT spending wrapped up with a single provider?

    Situations Where Integration Is a High Priority

    To be sure, there are situations where integration should be a high priority. I would not like to see an organization pick an accounts payable module from one vendor and a purchasing module from another. These functions are too tightly coupled. Furthermore, purchasing and accounts payable are generally not systems of strategic advantage. Customers are better off buying them from a single ERP vendor, implement them, and move on to more strategic opportunities. 

    Likewise, in supply chain management, I don't like to see sales and operations planning, advanced planning, and event management selected from different vendors. These functions form a closed loop with a single data model. Material planners need to be able to perform these functions simultaneously in parallel. Building interfaces to cascade information from one system to another is simply too cumbersome.

    Criteria for Evaluating Integration Needs

    I don't expect that the large integrated suite vendors will change their message. For them, suites always win. But for buyers, I recommend a broader perspective.
    • Is the system you are looking for one that must be integrated with other systems in your portfolio? 
    • If so, can you verify that your incumbent vendor has really integrated those two systems? 
    • How many integration points are really needed, and how many are nice-to-haves that could be satisfied with a simple work around?
    • For those that need automated integration, how difficult would it be for another vendor to provide that integration? 
    • Do third party vendors have references that have done that same integration with other customers? 
    • Do the benefits of a third-party vendor in terms of adoption, ease-of-use, and competitive advantage outweigh the benefits of pre-built integration? 
    Finally, is the system you are looking for one where innovation, competitive advantage, ease of use, and high adoption are top priorities?  If so, the best choice may not be from your incumbent provider. The fact that the large Tier I suite vendors have been acquiring smaller best-of-breed providers is evidence that leading edge innovation is happening outside of the integrated suites.

    Customers should think through the answers to these questions and make the right decisions for their businesses. If they do so, many times, suites won't win.

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    Photo Credit: www.seewellcn.com

    Tuesday, January 28, 2014

    Plex's Growth Strategy: Glass Half Full

    Those interested in cloud ERP know that Plex was the first provider to offer a cloud-only manufacturing system. Yet Plex has had nowhere near the growth of other cloud enterprise system providers, such as NetSuite. SAP receives a lot of criticism for only having sold 1,000 or so customers its Business ByDesign system--but ByD has only been in general distribution for three or four years. Yet Plex, which launched its cloud offering over 10 years ago, has fewer than 500 customers.What's wrong with this picture?

    Last year, encouraged by Plex's new private equity owners, CEO Jason Blessing and his management team formulated a growth strategy, which they presented at the Plex user conference. Afterwards, I outlined what I thought Plex needed to do to execute on it.

    Following up now half a year later, Jason circled back to give me another briefing, and it was a good opportunity also to see what progress Plex was making. Here is my take: 
    1. Management changes are part of the growth plan. Plex this week announced the appointment of Don Clarke as its new CFO. He appears to be a great candidate for the job. He comes most recently from Eloqua, a leading marketing cloud vendor, where he oversaw Eloqua's growth to nearly $100M in annual revenue, its initial public offering, and its eventual sale to Oracle last year, which put Clarke out of a job.

      I joked with Jason that Oracle's acquisition strategy has been serving Plex well in terms of recruiting, as several of Plex's top management team have come from companies that Oracle acquired: Heidi Melin, Plex's CMO, also came from Eloqua, Karl Ederle, VP of Product Management spent time at Taleo, which Oracle acquired in April 2012, and Jason himself came from Taleo.

      If Plex's growth strategy is successful, there is likely to be an IPO in Plex's future. Clarke's experience in taking Eloqua public will serve Plex well.
       
    2. Plex added 59 new customers in 2013, bringing its customer count to "nearly 400." As mentioned earlier, in my view, the total customer count is well below where it should for a decade-old cloud provider. Jason compares it favorably with the 500 or so customer count for Workday, overlooking the fact that Workday launched in late 2006 and that its typical customer is several times larger than Plex's.

      Still, Plex's growth in 2013 represents a 15% increase in its customer base and signals that its growth strategy is beginning to take hold.

      The new customer count includes some accounts that are larger than Plex has sold to in the past, such as Caterpillar, which is running Plex in a two-tier model for some smaller plants. In my previous post, I outlined some of the functionality improvements that Plex would need to make to better serve these large customers, and there are signs that these enhancements are underway.
       
    3. Plex doubled its sales force last year. This, no doubt, is behind the uptick in new customer sales. The new sales headcount is serving primarily to expand the geographic coverage outside of Plex's traditional Great Lakes concentration to the South and also to the West Coast. (As part of the expansion, Plex opened a Southern California sales office, which happens to be a short walk from my office near the John Wayne Airport.) There are also increased sales to organizations outside North America, another hopeful sign.
       
    4. Plex's industry focus remains in three industry sectors: motor vehicles, food and beverage, and aerospace and defense. In my view, this is probably the greatest constraint to Plex's growth strategy. Short-term, having more feet on the street and expanding geographically are low-hanging fruit. But at some point, there will be diminishing returns. Manufacturing contains dozens of sub-sectors, many of which are adjacent to Plex's existing markets. It is not a big jump to build out support and sell into these sub-sectors. We discussed a couple of these, and hopefully, Plex's product management team will have the bandwidth to address them.
       
    5. Plex's platform remains a weak spot. Most cloud systems today provide a platform for customer enhancements and development of complementary functionality. For example, Salesforce.com offers Salesforce1, a mature platform-as-a-service (PaaS) capability that has spawned an entire ecosystem of partners. NetSuite, likewise, has its SuiteCloud platform.  Although Plex has the beginnings of such a platform, it is still limited to use by Plex's own development team and a few carefully-vetted partners. Jason knows this is a need, and hopefully we will see more progress in this area. 
    There is a lot to admire about Plex. Of the few cloud-only ERP providers that are addressing the manufacturing sector, Plex has the most complete footprint of functionality, rivaling mature on-premise manufacturing systems. In addition, customer satisfaction is readily apparent when I speak to installed customers, both new and old. Hopefully, Plex will build on these strengths and see growth accelerate.

    There is a Plex 2013 year-end recap available on the Plex website.

    Update: And right on cue, Dennis Howlett has done an on-camera interview with Jason Blessing about Plex's 2014 strategy. He also comments on Plex's approach to SaaS pricing. 

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    Friday, January 24, 2014

    Workday Making Life Easier for Enterprise Users

    Even if you don't follow developments in HR technology, you should pay attention to what Workday is doing, for two reasons. First, Workday is no longer just an HR systems provider, having expanded its footprint into financial systems, operational support for service delivery, and business intelligence. Second, as a SaaS-only provider, Workday has been, in my opinion, a leader in best practices in deploying cloud enterprise systems.

    In December, the company released Workday 21. In addition to the 246 new features included in this version, it also features a major update to its user interface, which Workday starting rolling out earlier this month. 

    Enterprise User Experience Overdue for Refresh

    The look and feel of enterprise software has not changed much since the days of client server, when graphical user interfaces took over from the old green screen mainframe-like experience. Workers use desktop computers to access a main menu, which displays a series of icons or links that point to various subsystems. Data entry screens cram as much information as possible so that users do not have to click through to multiple panels to complete a transaction. Because of the density of information, enterprise software came with extensive user manuals, online help, and training classes.

    When vendors abandoned the client-server architecture for browser-based thin clients, they did not generally change this paradigm. They just changed the back-end. They did not significantly alter the fundamental user experience.

    Now vendors face a serious problem when users demand mobile access. These user interfaces do not translate at all to a smart phone or tablet display. Mobile access, if provided at all, is a completely different user interface than that on the desktop. In fact, some vendors sell mobile access as an additional product, separate from the vendor's traditional desktop access.

    Raising the Bar

    Workday has always paid a lot of attention to its user interface. In fact, Workday has gone through something like five major updates in its UI: from HTML/AJAX to Adobe Flex, then adding native IOS and Android, and now to HTML5.

    But apart from the technology change, Workday's new interface illustrates several best practices, some of which it derived from consumer Internet services, such as Google and Facebook.These are my take-ways:
    1. One interface for all platforms. The familiar "Workday Wheel" is now gone. Why? Because it did not translate well to smartphone or tablet access. The new homepage is a grid of icons that resize and scale according to the size of the screen.
       
    2. Easy movement between platforms. Most of us get interrupted in the middle of our work. The new UI allows users to start a process, such as a performance review, on one platform (e.g. a desktop) and then continue or complete it on another platform (e.g. a smartphone). 
       
    3. Less is more. Workday has removed less-than-essential information from panels, such as the employee profile, organizing and relegating it into tabs or linked lists, so that panels focus the user's attention on what is most important. I especially like the drop-down navigation on the left side of the header bar, which looks quite a bit like Facebook's left side navigation.

    4. Inbox-driven workflow. No more jumping jumping back and forth to the Workday Wheel to complete tasks. A new unified in-box gives users a view of all notifications, with a preview pane and ability to take action right in the inbox.
       
    5. Intuitive use. Viewing the user interface in action, it becomes obvious that most users will not need a lot of training on "what key do I press?" As in the past, they will need training on Workday's functionality and how it applies to their jobs. But the new interface should greatly speed the time to productivity for most users. 
    These are just some of the points about the new UI. In addition, there are many functionality enhancements, which I'm not covering here.

    To see quick overview of the new UI, check out this video by Workday's VP of User Experience, Joe Korngiebe (you can skip past Joe's opening remarks and start at the one minute mark, if you like). 

    To be fair, other enterprise vendors, such as Infor, Oracle, and SAP, are making great strides in the user interfaces as well. Workday's most recent release provides another example of how life is getting easier for enterprise software users.

    Update: Over at Diginomica, Dennis Howlett has his own take on Workday's new UI.

    Related Posts 

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    Thursday, January 23, 2014

    Evaluating UNIT4's Growth Strategy

    Changes are afoot at UNIT4, a European-based ERP provider. UNIT4 is looking to move to the next level, and it held a virtual press conference earlier today to outline its growth strategy going forward. This post outlines some of the key points along with my viewpoint of its likely success.

    UNIT4 is best known for its Agresso ERP system, its Coda Financials system, and its majority ownership of cloud ERP provider, FinancialForce (with minority investment by Salesforce.com).

    UNIT4 has been a well-regarded ERP provider for years, focused largely on the services sector. Like many traditional vendors, UNIT4 has been transitioning to cloud delivery and, fair to say, has been more successful than many of its peers. At a time when many traditional ERP providers have less than 10% of their revenue from the cloud, UNIT4 claims to have more than half of its 450M euro annual revenue derived from subscription services.

    New Leadership for the New Strategy

    UNIT4 has a new CEO, Jose Duarte, who came on board seven months ago. He served as co-CEO alongside Chris Ouwinga until January 1, when the board appointed him as sole CEO. Duarte came to UNIT4 from a 20-year career at SAP, which including roles as President of the EMEA & India region and President of the Latin America region.

    If UNIT4 had announced its new growth strategy without making any management changes, I might doubt its seriousness. The top management change, therefore, is a good sign.

    Core Message is Familiar  

    UNIT4 has long had a message of enabling its customers to "embrace change," and it touts its offering as being highly flexible and adaptable to changing business conditions. In its new growth strategy, that messaging does not appear to be different.

    Duarte does point out that the pace of change is increasing--not only from economic and regulatory pressure, but also from the pressure of new technologies, such as the so-called "SMAC" technologies (social, mobile, analytics, and cloud).  Yet IT leaders spend 80% of their budgets on "keeping the lights on," leaving only 20% for innovation. UNIT4 intends to help its customers transition from transaction-centric to people-centric systems.

    In my view, this message is good but it is not particularly distinctive. Most other enterprise software providers have adopted this story--not just newer providers, such as Salesforce.com and Workday but incumbent providers, such as SAP, Oracle, Infor, and Microsoft. Whether they actually accomplish that is another question--but the message is the same.

    Vertical Solutions May Be Differentiating

    UNIT4 Vertical MarketsWhen it comes to UNIT4's industry focus, however, I do see something that may be distinctive. Unlike many enterprise software providers that attempt to cover a broad range of markets, UNIT4 is distinctly focused on services businesses (including public sector), as shown in the schematic nearby.

    Notable, there are no manufacturing sectors in UNIT4's target verticals. ERP has its roots in the manufacturing industry, and that ground is fairly well covered by other providers. By focusing on less crowded verticals, UNIT4's growth strategy has a better chance of success. Some of the sectors--such as financial services, investment companies, travel management, housing authorities, real estate, and insurance companies--have many fewer competitors targeting them. On the other hand, some of the sectors, such as professional services, are targets for some of the newer cloud-only providers, including UNIT4's own FinancialForce investment.

    Overall, I am bullish on UNIT4's market focus. 

    Willingness to Buy or Partner instead of Build

    There is another piece that represents a change in UNIT4's product strategy, and that involves partners. To fill out its offerings for some industry sectors, there are some pieces that UNIT4 may not build directly. This is especially true when addressing sector-specific processes. Duarte didn't mention claims processing in the insurance industry, but I would suspect that might be a good example. In such cases, UNIT4 will be more willing in the future than it has in the past to partner for or even acquire complementary solutions.

    Private Ownership May Facilitate the Strategy

    In November, UNIT4 announced that it had been approached by private equity firm Advent International in a cash offer to buy all issued and outstanding shares of the company--effectively, to take UNIT4 private. Duarte more or less implied that this transaction, which UNIT4 had not solicited but nevertheless was recommending to its shareholders, was not directly related to its growth strategy, although the growth strategy was one of the things that made UNIT4 attractive to Advent.

    Whether related or unrelated, I find a potential departure from public ownership a positive step for UNIT4. Software vendors transitioning from on-premises license sales to cloud subscription revenue often face pressure on financial results as money that would have been collected up-front is now spread out over the subscription period. Taking away the need to report quarterly results gives UNIT4 breathing room to make the transition to cloud.

    Private ownership may also give UNIT4 more flexibility in making those niche acquisitions for complementary products that are essential for its target industry sectors, as they would be able to be completed more quickly than would be the case where public shareholders would need to be involved. 

    UNIT4 has already made substantial progress in its migration to the cloud, but that is only one of the transitions needed. Hopefully, under private ownership, UNIT4 will be able to fulfill all the elements of its new growth strategy.

    Update: Over at Diginomica, Phil Wainewright summarized his half day briefing with UNIT4 in a curiously titled post: Unit4 updates Agresso to SMAC the BLINCs  

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    Monday, January 20, 2014

    Four Cloud ERP Providers on the Salesforce Platform

    As cloud ERP solutions mature, they are becoming viable alternatives to traditional on-premises and hosted ERP systems. Dreamforce 2013, the annual conference of Salesforce.com users in San Francisco last November, offered a good opportunity to review the progress of four such cloud ERP systems—all built on the Salesforce.com platform.

    Salesforce1: The Next Generation Salesforce Platform

    During the conference, Salesforce unveiled the latest iteration of its platform, now dubbed Salesforce1, as shown in Figure 1.  The platform has a lot going for it.
    • It provides a complete applications development environment (a platform-as-a-service, or PaaS) running on Salesforce.com’s cloud infrastructure. Developers building on Salesforce1 can interoperate with any of Salesforce.com’s applications, such as its Sales Cloud, Service Cloud, Marketing Cloud, as well as other third party applications built on the platform. 
    • It includes social business capabilities. Developers can incorporate Salesforce.com’s social business application, Chatter, as part of their systems. 
    • The platform puts mobile deployment at the center, allowing apps to be written once and be deployed simultaneously on a variety of user platforms, including desktop browsers, tablet computers, and smart phones. In support of the so-called "Internet of Things," Salesforce1 can even be deployed on connected devices. 
    • Finally, the platform provides a way for developers to market and sell their applications, by means of Salesforce.com’s AppExchange marketplace. 
    For a detailed view of Salesforce1, see this review by Doug Henschen over at Information Week.

    With Salesforce.com now the market leader in CRM, it is no wonder that its platform has become more and more attractive to developers. Building on this platform, third-party developers become, in essence, an ecosystem around Salesforce.com, with strong network effects. The more popular the platform becomes, the more it attracts developers. In return, the more developers build on the platform, the more attractive it becomes to other developers. It is a virtuous cycle.

    In our consulting work at Strativa over the past three to five years, I’ve seen several cases where organizations first implemented Salesforce.com’s CRM system, then based on that success started looking to see whether they could replace their existing on-premises ERP system with a cloud-based solution. And, when they search the AppExchange, they find four cloud ERP providers: FinancialForce, Kenandy, Rootstock, and AscentERP.

    I’ve been following these four providers for several years, and this post serves as an overview and update, based on briefings and interviews I conducted with these four vendors during the Dreamforce user conference.

    FinancialForce

    As the name implies, FinancialForce started in 2009 as an accounting and billing system. It was formed as a joint venture between UNIT4 and Salesforce.com. The company expanded into professional services automation in 2010 with the acquisition of a PSA system from Appirio, built on the Salesforce platform, and by building out its own services resource planning (SRP) functionality. More recently, Financialforce developed offerings for revenue recognition and credit control on the new Salesforce1 platform for revenue recognition, pushing these functions out to sales and services users in the field.

    The company lists 50 customer case-studies on its website, an impressive number for a vendor that is only four or five years old.

    At Dreamforce 2013, FinancialForce took two more steps to expand its ERP footprint. First, it announced acquisition of another AppExchange partner, Less Software, which provides configure-price-quote (CPQ), order fulfillment, service contracts, inventory management, and supplier management modules. Founded just two years ago, Less Software was already partnering and doing joint deals with FinancialForce, so the acquisition does not appear to acquire much if any integration work. FinancialForce refers to Less Software as having supply chain management (SCM) capabilities, but I would view that as somewhat of an exaggeration. There are some light warehouse management capabilities, but no transportation management or supply chain planning functionality that I can see. Less Software has had particular success in selling to value-added resellers, such as Cisco resellers, as well as to industrial distribution organizations and one manufacturer of children’s furniture.

    The second step, announced during the conference, was the acquisition of Vana Workforce, a human capital management (HCM) software provider—which is also built on the Salesforce platform. Vana's HCM functionality includes core HR, talent management, recruitment compensation, time management, and absence management. Payroll is not provided, but the system can connect with a number of popular payroll systems. As with Less Software, Vana Workforce was already partnering with FinancialForce, so the integration effort, again, would appear to be minimal.

    Organizations in the professional and technical services sector should take a look at FinancialForce, as well as anyone needing a financial management solution. With its acquisition of Less Software and Vana Workforce, FinancialForce now qualifies for the short list for distribution and light manufacturing companies. There were hints during my briefings that FinancialForce may continue with an acquisition strategy, so it is likely that additional industry sectors may become potential targets for this solution provider.

    Kenandy

    I covered the launch of Kenandy back in 2011, when I interviewed its CEO Sandra Kurtzig. Sandy was the original founder and CEO of ASK Group, the developer of the well-known ManMan ERP system. Her coming out of retirement to launch a new ERP system made a big splash at Dreamforce 2011, where she appeared on stage with Salesforce CEO Mark Benioff and Ray Lane, former Oracle President and now Kenandy board member representing investor firm, Kleiner Perkins. Salesforce.com is also an investor in Kenandy.

    Since that launch, Kenandy has been rapidly adding functionality. It has its own financial systems, including general ledger, invoicing, accounts receivables, and accounts payables. Multi-company and multi-currency support were added earlier this year, with up to three reporting currencies. According to Kenandy executives I interviewed, the system also supports multiple plants with multiple locations in a single tenant. There is a full MRP explosion. Lot tracking and serial tracking allow Kenandy to sell into foods and other industries that require track and trace. Item revision levels are tracked with multiple revisions allowed in inventory.

    Only three years in existence, the installed customer base is small but growing, with some impressive wins. During Dreamforce, Kenandy touted its recent win with Del Monte Foods, which implemented Kenandy for its acquisition of Natural Balance, a pet food manufacturer. I spent some time one-on-one with the Del Monte project leader, who provided quite a bit of insight into the dynamics of the implementation. Del Monte was able to implement Kenandy’s full suite—financials, customer order management, and distribution—in just three months. This included integrations with third-party systems for EDI, warehouse management, and transportation scheduling.

    He also shared with me that he wrote a trade promotion management (TPM) system on the Salesforce platform, integrated with Kenandy, in just six weeks—and he did it by himself. He had previously built a similar system integrated with Del Monte’s legacy system, but that effort took seven months with a team of seven developers. Even discounting the fact that his previous experience might have made development of the second system easier, by my calculations this is about a 50 to 1 improvement in productivity, illustrating the power of the Salesforce platform.

    Del Monte is not finished with Kenandy. The firm reportedly plans to eventually move all of Del Monte’s ERP processing from something like 60 internal systems to Kenandy.

    More information Del Monte’s experience can be found in a case study on Kenandy’s website.

    Rootstock

    Rootstock Software is another manufacturing ERP provider with an interesting history. The management team, headed by CEO Pat Gerehy and COO Chuck Olinger, has decades of experience building manufacturing ERP, most recently at Relevant. Following the sale of Relevant to Consona (now Aptean), the team embarked on a new venture to build a manufacturing cloud ERP system from scratch. They developed their first iteration of Rootstock on the NetSuite platform in 2008, interoperating with NetSuite for financials and customer order processing. In 2010, however, they disengaged from their NetSuite partnership and rewrote Rootstock on the Salesforce platform. (That the Roostock developers could build a complete system so quickly on the NetSuite platform and then again on the Salesforce platform speaks to the power of these modern cloud platforms for rapid software development.)

    As a result of the replatforming on Salesforce, Rootstock developed its own customer order management product and now partners with FinancialForce for its accounting systems. It also has good functionality for purchasing, production engineering, lot and serial tracking, MRP, MPS, and capacity planning, shop floor control, manufacturing costing, and PLM/PDM integration. The system can support multiple companies, multiple divisions, and multiple sites, all within a single tenant on the Salesforce platform.

    On its website, Rootstock highlights an impressive list of 25 customers. These include Astrum Solar, a residential solar provider with operations in a dozen states in the US. EBARA International, a manufacturer of pumps and turbine expanders in the energy industry, with 77 subsidiaries and 11 affiliated companies worldwide.

    Over the past year, Rootstock has been gaining traction. After the Dreamforce conference, it announced four more wins in the month of November: Microtherm, a business unit of ProMat International; Proveris, which provides testing protocols for drug developers; Source Outdoor, an outdoor furniture manufacturer; and Wilshire Coin, a coin dealer.

    Buyers looking for strong manufacturing functionality, including hybrid modes of manufacturing, should consider Rootstock. Project-based manufacturing is also a sweet spot.

    AscentERP

    AscentERP approaches manufacturing ERP from the execution side of the business. Its co-founders, Michael Trent and Shaun McInerney, have a long history in warehouse management and data collection, and it shows in the capabilities of the product. Built from the start on the Salesforce platform, AscentERP supports production modes of build-to-order, assemble-to-order, and configure-to-order along with repetitive manufacturing capabilities. It can take opportunities from Salesforce.com and convert them into sales quotes and into sales orders in the production system. The system supports the complete manufacturing process from master planning, purchasing, production, and shipping. Reverse logistics is also supported through an RMA process.

    Like Rootstock, AscentERP supports the accounting function through partnership with FinancialForce. In addition, the system also integrates with Intacct, another SaaS financials system. For smaller companies, Ascent created an integration with Quickbooks.

    During Dreamforce, AscentERP announced advanced manufacturing functionality, including workflow and alerts, multi-plant and multi-location support, production scheduling and tablet computer data collection using the new Salesforce1 platform.

    Reference accounts include Chambers Gasket in Chicago and All Traffic Solutions, a manufacturer of electronic roadside signs. Both of these customers use FinancialForce for financials. Other reference accounts include The Chia Company in Australia, the world’s largest grower of Chia seed and products, so familiar during holiday season, and SolarAid, an international charity that provides access to solar lighting.

    Buyers may want to short list AscentERP if they are looking for a nuts-and-bolts production system with good support for warehouse management and data collection. Smaller companies may find the Quickbooks integration an interesting option, allowing them to implement ERP without having to give up Quickbooks.

    One sales strategy I wish more enterprise SaaS providers would follow: AscentERP offers a free 30 day free trial on its website.

    Cast a Wide Net

    All ERP systems have their strengths and weaknesses, and these four are no exception. For example, all of these systems are relatively new. Although they are rapidly building out their functional footprints, there are still gaps in their functionality. Buyers that insist on having every box checked on their RFPs may not like this, but those buyers who are willing to do some system enhancements on the Salesforce platform may find that the advantages of speed and flexibility outweigh any short-term gaps. It all depends on whether buyers are viewing pure cloud deployment as a strategic advantage.

    The four vendors outlined in this post are not the only cloud ERP providers in the market. Buyers should also consider other providers, not built on the Salesforce platform. These include established cloud players such as NetSuite and Plex, as well as newer entrants, such as Acumatica. Finally, some of the traditional providers of on-premises ERP systems, such as SAP, Oracle, Microsoft, Infor, and Epicor, offer hybrid cloud deployment options that may be alternative to these cloud-only providers.


    Choosing the right ERP system—whether cloud, hosted, or on-premises—can be challenging. Those looking for more in-depth analysis and independent advice in navigating the process should consider our software selection consulting services at Strativa.

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