SAP SaaS marches on

SAP is laying out a strong SaaS program and has keen view of the future.  They’ve organized themselves into upper domain areas of: People, Money, Customers, Suppliers, and Special.  They then have their horizontal glue layers of Social and Integration.  Finally, they have supporting layer of SaaS ERP in 2 flavors: Business-By-Design and Business One.  This clearly laid out in the illustration below.

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Most of the SaaS attention has gone to People with SAP’s acquisition of SuccessFactors.  Indeed, success factors is leading the SaaS charge at SAP both in terms of ideation and management with Lars Dalgaard heading the cloud unit.  SuccessFactors brings a SaaS pedigree to SAP.

All “legacy” or pre-SaaS software vendors including those like IBM, Oracle, Computer Associates, etc. all face the same challenge.  How to use a usage base metric to drive revenue and determine re-investment.  In addition, legacy vendors often haven’t built in cloud capabilities and multi-tenancy which is the key scaling and upgrades leading to lower costs.  I think you’ll see legacy software vendors buy some of the skills.  I also think as the whole market shifts to cloud, SaaS will simply become the pervasive model and vendors will adapt.

Tersely put, how do you change your revenue stream?

  • Old Revenue Formula  = Licenses + Support
  • New Revenue Formula  = Utilization metric (i.e. per user, per month, per incident, etc.)

Honestly, I think the non-cloud and even non-SaaS type application will become the exception.  So like all creatures faced with drastic environmental changes, software vendors have 3 choices:

  1. Move (find business that can’t use cloud or won’t adopt as fast)
  2. Die (easy, just don’t change)
  3. Adapt (move to more efficient modes such as re-architecting for SaaS)

One of SAP’s other big SaaS applications is Ariba.  In addition to being a substantial procurement software product with huge numbers of consumers and suppliers in their network, they are the model of moving to cloud and SaaS to survive.  They have already made the adaption.  If SAP is smart, they will take the lessons learned from the trial by fire of Ariba and apply it to their own journey. 

I think the movement to cloud, and mostly to SaaS, is one that all vendors will need to follow to remain viable.  Keep in mind there are companies today that will join the Fortune 500 in the next 5 years and will have never purchased an enterprise class server or purchased enterprise software.  As an industry, How are we going to provide value add services?  How are we going to morph our products to meet their non-procurement cycles?  Are we going to be part of the company that: 1) Moves, 2) Dies, or 3) Adapts. 

Next blog, I’ll talk more about the lower layers of Social, Integration, the two ERP SaaS options which will yield a new way to do roll-outs via 2-tier ERP.

Watching with pride and envy and gratitude

When I came to IBM, I said one of my aspirations was to help someone reach a Sr. VP in IBM.  I don’t mean promote them, but I mean be part of their path.  We all work in web of influence.  Helping others mature along their paths and achieve to their highest levels is critical.

At the same time, it can mean promoting people to your level or above.  It is impossible to not feel a twinge of jealousy.  For me, I have to acknowledge this, but then move on.  Good news is I think I got close.

My dear friend, colleague, and now Sr. VP Vijay at SAP has made it.  In all honesty, I had very little nothing to do with it.  Maybe an encouraging word or a bit of advice, but it was Vijay’s work ethic, willingness to take chances, and positive bright outlook on life, technology, and people that got him to this level.

It is not anyone, but all of these combined that has brought him success.  At a large client, he took on the latest Netweaver features when everyone including me said they wouldn’t work.  When they didn’t, he didn’t stop.  He just got some help from SAP establishing a relationship with those in SAP and then succeeded.  Later he turned his gregarious nature, sharp mind, and experience into a blog.  At the point he entered the digital public domain, there were very few and no real IBM policy.  Vijay has lead the way.

In the end, I think I gained the most.  I learned to take a more positive attitude and avoid my darker side.  I moved my blogging from inside IBM and inside of SAP, to this forum.  While I don’t expect to gather the response that Vijay’s http://andvijaysays.wordpress.com/ blog gathers, it has been a learning experience for me.

Now that I have a colleague who made it to SVP in SAP; I’ll have to find someone to work with to make SVP in IBM.  And let me challenge you, who are you helping move their career and life forward?  I think you’ll find you get as much, or more than you give.

SAP needs Development Simulation / Emulation Environment

Last week I was hearing how difficult it is to develop solutions for SAP from developers. Vijay’s blog was specific to mobile, but I don’t think it really matters that much if it mobile or computer based development. What if SAP had an SAP simulation engine that all developers could plug into for free.

Imagine you want to develop simple SAP applications. You should be able to completely test drive the SAP programs without owning them. You simply write a program to a SAP provided specification and run it against the SAP simulation engine. The engine would validate your inputs and outputs were correct and then allow you to even drive some workload through your application and into the SAP application simulation engine.

SAP could roll out modules over time. If it works, there will be growing multitude of little applets for SAP applications making SAP easier to use. Since there are emulators for mobile devices, these coupled with these emulators accelerating the growth of the mobile market. While this is not complete mobile solution, it certainly jump-starts then engine.

The object for SAP should always be to own the core or the framework. The core is the business logic SAP wants you to buy and not the small stuff. You want to actively encorage others to develop in and around your platform. Facebook doesn’t worry about the mini-app revenue; instead, they encourage it. It makes the Facebook world a more valuable piece of Internet real estate.

This week I had client raving about how great Salesforce’s development environment along with the social capabilities. SAP needs to get out of the idea they want to sell any thing other than the core framework and business logic. Everything else just needs to reinforce the value of SAP’s core. Why not let SAP want-to-be developers start cranking out applications and applets for SAP. A free, friendly, easy to consume environment will go a long way

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When will Sybase ASE be FREE for all SAP system users

I am surprised SAP has not announced that the standard database from the Sybase acquisition is free to all SAP system users.  I will even be more surprised if they do not make the announcement at Sapphire 2012.

Why would SAP give away Sybase ASE?  They could make some amount of revenue by selling it, but by giving it away they improve the ROI of the migration.  Migration costs are the biggest barrier to any DB or OS change under an SAP system.  In addition, they take away the 20% maintenance and enhancement (M&E) fees their number #1 competitor, Oracle, is gaining from every SAP system running on Oracle.  I wonder how much of the reported $12B Oracle reported of support revenue in 3rd quarter is driven by SAP systems running on Oracle RDBMS.  That is potentially billions of dollars that Oracle does not have to attack SAP, develop new applications, or build a cloud business.  Oracle’s M&E, like everyone in the software business, is a substantial part of the revenue and more importantly profit stream of the business.

In addition, SAP can optimize the ASE database for SAP.  In fact they could make all other vendors’ database versions a port.  The best and brightest capabilities would be in found in the latest release of ASE coupled to SAP.  In addition, they can up sell Sybase Replication Services (SRS) as an Extract, Translate, and Load (ETL) engine, Disaster Recovery (DR) solution, and high availability (HA) solution.  They also can  up sell to HANA for higher performance.

Pushing out ASE will cost something.  SAP will have to support, develop, and move ASE forward.  They should have those resources from the acquisition and from previous DB efforts like mySQL.  Most of that cost is already accounted for excluding the go forward actions to stay on par with other major DB vendors in the SAP world; however, Sybase is are major player in the financials arena today, too.

SAP is going to break some glass with the big database providers, Oracle, Microsoft, and IBM.  While I’m sure they don’t care about Oracle’s opinion, they are strongly partnered with Microsoft and IBM.  It may be taken very poorly by IBM and Microsoft; however, I’m not sure either of them can let go of all the other areas they are linked into SAP especially IBM who has the world’s best (my opinion and Forrester’s) largest SAP practices.

HANA may be getting all the headlines, but the world is not done with RDBMS.  There is still a need.  There are still companies making lots of money, especially Oracle, on RDBMS software.  When is SAP going to give its clients something FREE to smile about and at the same time take so much away from their biggest competitor, Oracle.  Seems like a win-win for SAP and its clients.

Killing the cloud with success

Today, there are two threats to cloud becoming a reality.  First are the end users.  Second are the vendors. 

End users, especially at the division layer or in remote offices, are driven towards cloud based solutions, especially SaaS, like moths to a flame.  Any program that works on per user per month basis must be better than this old dumpy client /server or host based system.  Look, it has this cool spinning widget and it works on a smart phone.  The attraction is understandable.

At the same time, they often don’t look into core issues like “what is the security model and does it meet corporate requirements”, “does it meet all my functional requirements” and “how does it integrate with my other systems.”  That latter problem is the killer.

While tools like IBM CastIron can solve a lot of problems, most clients don’t get to the integration discussion until after they have already purchased the cloud based solution.  In fact, in the rush to get to the cloud solution, clients are willing to go to much simpler and less rich environments. 

IT departments would be served well to understand how communicate better with their business constituents.  IT departments often take the requirements on face value and then build the 98% solution at 120% of the cost.  Cloud solutions are usually 80% solutions for 50% of the costs often leaving out the hardest and most costly components.  If IT departments took it upon themselves to really partner with the business, maybe they could get to 95% solution at 50% to 70% of the cost.  The key will be identifying the cost driving factors in the solution.

Identifying TCO at a feature / function level is not easy; however, it is critical.  It is the real role of a good architect and especially the solution or application architect.  Simply telling the constituent all the parts they need is not enough.  You have to be able to understand the short term, long term, and cost impacts.

Vendors are not helping either.  Someone referred to the problem as “cloud confusion” in random blog.  Everything that is available on the internet is called a cloud solution.  There is a huge problem with calling backup storage  “cloud storage.”  What is dynamic about it?  What is virtual?  The Apple iCloud is a little better since does let you for FEE use Apple’s copy of your music from their library by just putting a pointer in and avoiding the storage. This is double dipping since they charge you and have to give you less storage, but we also pay $45 to get a better seat on the airline.  PT Barnum said something about that.

Equally confusing is SaaS.  You’d think that SaaS means a software solution that is built on IaaS and PaaS and multi-tenancy, but not always.  You’d even expect it to be multi-tennant.  It turns out that many of the SaaS solutions in the market are really just client/server systems on the internet that are billed by user/month or some similar consumption based model.  Bob Moul wrote Demystifying SaaS vs. Cloud  to help identify a SaaS product vs. a not SaaS products.

Most consumers of cloud are not worried whether it is really cloud.  They only care it gives them flexibility and outcomes they desire.  When designing any solution, keeping flexibility and outcomes in mind is always a good idea.  Too often, we get trapped in the details to the point of making everything too complex.  Worse, the complexity feeds on itself, too.  There are worse things than calling an analog by the wrong name.

Good news is that cloud will go eventually go away.  Not that it will cease to exist, but it will cease to be discussed.  It will be the default architecture.  Today, everyone is designing for the cloud, the true cloud, with all the assumptions of relocation, compression, and smaller virtualized servers.  Until then, there will be a lot of work getting us to that promised land of low cost elastic solutions with high performance and ease of use.  Cloud Encapsulation will let us bring many of those benefits to non-cloud applications, too.

A view from the C-Suite

I love working with technical people.  I’ve either been one or managed them my entire career.  When people used to tell me Unix wasn’t friendly, I used to respond “if you want friendly, get a dog.”  One time when I was managing the Basis team for a client on a large implementation, the project executive called me and said my new “guy” had arrived and was lost.  I asked him how did he know he was my guy, he said “he’s wearing suite pants 2 inches too short, white socks, and hard shoes.”  I responded “He’s mine – which way did he go?”  Not all technical people fit the stereotype and many don’t, but enough do that it rings true to anyone I’ve shared this story with.

Since I started my career in college swearing I’d never wear a tie (I was a biologist), live in cornfield (only home in Naperville, IL I could afford), or work for IBM (the implemented a great Unix variant: AIX),  What I find so amazing about working with technical people is how they think.  Technical people love to solve problems.  In my career, I found I wanted to influence not just the details of implementation of the technology, but the thought that went into designing the project.  To do that required  more than just learning to tie a tie and put on suit.  It meant learning to understand how business was conducted and how and what the senior leaders in companies thought.

Here are some great insights collected by IBM of how the executives at your company view the world.  It has been collected, collated, and put into a readily consumable format.  And yes, I work for IBM.  I’m proud of working for them; however, this is my personal blog, so this is more me than the company.  In fact, I required to tell you that this is my personal opinion, plus it really is.

Regardless, since irregardless isn’t a word, this is great information.

Global CFO Study

http://www-935.ibm.com/services/us/cfo/cfostudy2010/

C-suite insights

http://www-935.ibm.com/services/c-suite/insights/

CEO study

http://www-935.ibm.com/services/us/ceo/ceostudy2010/

CIO study

http://www-935.ibm.com/services/us/cio/ciostudy/executive-views.html

Recently, I read the following.

Leave it to Rob Carter, the CIO of FedEx, to clarify what’s really powerful about cloud computing. Carter, the company’s CIO since 2000 and an InformationWeek advisory board member for almost as long, has a knack for discussing technology in a way that cuts to the business payoff, but without leaning on buzzwords that whitewash the complexity involved.

Carter boils down cloud computing, when applied to IT infrastructure, to “general purpose computing.” It’s the ability to connect servers, networking, and storage that are “workload agnostic,” meaning the jobs they handle can be shuffled around among a company’s computers, so those machines are used as efficiently as possible.

http://www.informationweek.com/news/global-cio/interviews/229100022

I agree from an operational view, but not from the bigger picture.  Cloud is part of revolution of opening computing from being a model of the sub-set of our life to a model of our life.  Cloud makes raw computing power almost free.  Now it only a question of what to do with it and how to use it.

I’d also like to thank my friend, colleague, and mentor for encouraging me to first blog on SAP Developers Network and now here.  I don’t think I would have done it without his encouragement.  His is one of the few blogs I seldom miss.

http://andvijaysays.wordpress.com/