Posts Tagged ‘CTO’

Tuesday’s Tip: Five Cloud/SaaS Contract Negotiation Tips For 2012

Published on January 10, 2012 by R "Ray" Wang

Business Leaders Often Poorly Prepared For Cloud/SaaS Contract Negotiations

Business leaders often take great care in building their Cloud and SaaS strategy, only to have many of the benefits of flexibility and agility hampered by overlooking details in their cloud contracts.   In conversations with over 200 cloud customers in 2011, key reasons include:

  • A common belief that SaaS and Cloud contracts are simple
  • Lack of software contract negotiations and procurement experience
  • Failure to review previous departmental contracts now in renewal mode
  • Limited access to SaaS and Cloud contract expertise

Avoid These Common Mistakes In Cloud Contracts

While SaaS/Cloud contracts are considerably less complicated, buyers should remember that even Cloud/SaaS software contracts still require some careful planning.  Lessons learned from over 1200 software contract negotiations highlight five common mistakes made in cloud contracts.

  1. Blindly including support costs with the contract. While Cloud/SaaS contracts automatically bundle maintenance and updates into the subscriptions, customers often do not realize that they do not have to buy support.  In fact, vendors are not allowed to require customers to buy support with subscription.  Avoid going for the highest level support upon initial contract signing.  This option can always be added at a later date.
  2. Failure to negotiate flex up provisions. Most contracts begin with a small number of users in a departmental setting.  However as usage grow, most enterprises just add additional users without securing upfront discounts potentially leaving 1000′s of dollars on the table.  In contracts, remember to secure discounts for 2x, 3x, and 4x, your initial usage.
  3. Forgetting to negotiate flex down. As with securing discounts for adding usage, the true test of elasticity occurs when companies flex down usage.  Negotiate the ability to reduce usage by 10%, 20%, and 30% without incurring penalties.
  4. Paying upfront without a discount. While many Cloud/SaaS vendors prefer annual agreements and annual payment upfront, savvy Cloud/SaaS buyers prefer to pay in more frequent cycles such as monthly and quarterly.  Should a Cloud/SaaS provider seek upfront payment, negotiate a discount commensurate to your hurdle rate.
  5. Not trading refrenceability for success. Customers often jump at the ability to serve as a referenceable client without ensuring that the software has been deployed.  Agree to serve as a reference only after the software has been deployed.  One common strategy, trade referenceability for prioritization of key features into the next release.

As Cloud/SaaS contracts emerge as the norm, buyers should keep abreast of other changes.  Stay tuned for the 2012 Cloud/SaaS Customer Bill of Rights to be published Q1 2012.

Your POV.

Need help with your software contract?  Contact us throughout the vendor selection process.  We can help with a quick contract review or even the complete vendor selection.  Let us know your experiences.  Add your comments to the blog or reach me via email: R (at) ConstellationRG (dot) com or R (at) SoftwareInsider (dot) com.

How can we assist?

Buyers, do you need help with your apps strategy and vendor management strategy?  Trying to figure out how to infuse innovation into your tech strategy? Ready to put the expertise of over 1200 software contract negotiations to work?  Give us a call!

Please let us know if you need help with your next gen apps strategy efforts. Here’s how we can help:

  • Providing contract negotiations and software licensing support
  • Evaluating SaaS/Cloud options
  • Assessing apps strategies (e.g. single instance, two-tier ERP, upgrade, custom dev, packaged deployments”
  • Designing innovation into end to end processes and systems
  • Comparing SaaS/Cloud integration strategies
  • Assisting with legacy ERP migration
  • Engaging in an SCRM strategy
  • Planning upgrades and migration
  • Performing vendor selection

Related Resources And Links

20100419 Tuesday’s Tip: Dealing With Pesky Software Licensing Audits

20090714 Research Summary: An Enterprise Software Licensee’s Bill of Rights, V2

20101214 Tuesday’s Tip: Dealing With Vendor Offers To Cancel Shelfware And Replace With New Licenses

20100308 Monday’s Musings: Decoupling Support From Maintenance – What Apps Vendors Can Learn From Microsoft Dynamics

20100222 Monday’s Musings: Why Users Should Preserve Their Third Party Maintenance Rights

20100104 News Analysis: SAP Revives Two-Tier Maintenance Options

20090210 Tuesday’s Tip: Software Licensing and Pricing – Do Not Give Away Your Third Party Maintenance And Access Rights

20090709 Tuesday’s Tip: Do Not Bundle Your Support and Maintenance Contracts!

20091222 Tuesday’s Tip: 10 Cloud And SaaS Apps Strategies For 2010

20091208 Tuesday’s Tip: 2010 Apps Strategies Should Start With Business Value

20091102 Best Practices: Lessons Learned In What SMB’s Want From Their ERP Provider

20091006 Tuesday’s Tip: Why Free Software Ain’t Really Free

20090504 News Analysis: Oracle Waives Fees On Extended Support Offerings

20080909 Trends: What Customers Want From Maintenance And Support

20080215 Software Licensing and Pricing: Stop the Anti-Competitive Maintenance Fee Madness

20090405 Monday’s Musings: Total Account Value, True Cost of Ownership, And Software Vendor Business Models

20090324 Tuesday’s Tips: Five Simple Steps To Reduce Your Software Maintenance Costs

20090223 Monday’s Musings: Five Programs Some Vendors Have Implemented To Help Clients In An Economic Recession

20091012 Research Report: Customer Bill of Rights – Software-as-a Service

20090910 Tuesday’s Tip: Note To Self – Start Renegotiating Your Q4 Software Maintenance Contracts Now!

20090721 Tuesday’s Tip: 3 Approaches To Return Shelfware

20090127 Tuesday’s Tip: Software Licensing and Pricing – Now’s The Time To Remove “Gag Rule” Clauses In Your Software Contracts

Reprints

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact sales (at) ConstellationRG (dot) com.

Disclosure

Although we work closely with many mega software vendors, we want you to trust us. For the full disclosure policy, stay tuned for the full client list on the Constellation Research website.

Copyright © 2012 R Wang and Insider Associates, LLC All rights reserved.

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Executive Profiles: Disruptive Tech Leaders In Cloud Computing – Adam Rogers, Ultimate Software

Published on January 9, 2012 by R "Ray" Wang

Welcome to an on-going series of interviews with the people behind the technologies in Cloud Computing.  The interviews  provide insightful points of view from a customer, industry, and vendor perspective.  A full list of interviewees can be found here.

Adam Rogers – Senior Vice President and Chief Technology Officer, Ultimate Software


1. Tell me in 2 minutes or less why Cloud Computing is changing the world for your customers

Adam Rogers (AR): Ray, let’s call it like it is. Cloud isn’t really disruptive – it’s already  disrupted – and we’ve made that transition over the past 10 years.  The new frontier for enterprise software is building systems that conform and cater to the user and how they want to work.  Let’s use Amazon as an analogy. A core difference between Amazon and the dozens of other e-commerce sites that competed for mind share in the 2000′s is that they realized early on that doing great work on behalf of the PERSON was more important than the URL or the consumer product segment.

Our customers benefit from cloud computing by taking advantage of business solutions for managing their people, instead of dealing with the cost and expense of IT. Second, because we handle all upgrades, they gain access to the latest functionality and don’t get trapped in a legacy on-premise solution that is outdated. There’s no barrier to upgrading. However, you’ve heard this all before. Honestly, these are really table stakes in business software today.

What Cloud is transforming for our customers is their ability to tailor the solution to their specific needs. For example, Google wanted us to handle the administration of payroll and the system-of-record, but they wanted to maintain the user experience of their internally developed GHR system. By connecting Ultimate to GHR through the Cloud, they can deliver a familiar user experience for their people while taking advantage of our backbone.

Importantly, small businesses gain access to enterprise systems at an affordable price point because:

1. If done right, it allows smaller businesses access (via affordability) to what used to be very expensive enterprise applications.

⁃ up front through the economies of scale well-architected systems create, enterprise class software can be sold at much less expensive price points than previously.

⁃ ongoing costs are contained.. and running in world-class data centers that only fortune 1000 companies could previously afford.

2. It brings the benefits of consumer software (constantly improved, modern user interfaces and simple) to enterprise customers who demand secure, stable and reliable applications.

We moved to cloud computing and SaaS 10 years ago because we felt it was good for our customers but in the end it also opened up the market to smaller customers with much smaller IT budgets. This is obviously great for our business model but very rewarding to know we can offer a world-class solution to what used to be out of reach to many companies.

2. What makes cloud computing disruptive?

(AR): Disruption typically has two major components. The first is cost and the second is making products available to a new class of customers.

Cloud computing has not only reduced the cost of business software, it has also made sophisticated systems available to organizations that previously wouldn’t have been able to afford to purchase and maintain those products. I think that’s a fairly obvious outcome at this point as discussed already.

What is less obvious, but more important in the long term, is that Cloud computing means we can — for the first time, really — combine applications that are tailored to the person and the device (an iPad, for example) with a robust administrative system on the back end. Those applications can be really small, and highly tailored, while still connecting to the core. That means users don’t have to deal with a lot of complexity, they can just focus on the work at hand — while still participating in the company’s core system.

This is disruptive because as the end of the day, this is great for consumers and customers but to execute, it really flips all accepted thinking on it’s side.

- Now we have to update our software early and often – the consumers demand this kind of cadence to realize the value. Consumers are using consumer applications and consumer devices and demanding that same elegant experience from their Ent Apps. GenX/Y’s are taking over the executive offices and making decisions on business software.

- Think about what it takes to do that… it’s an agile/iterative development process with continuous integration and deployment. That’s a simple sentence that is a multi million dollar investment for development teams. It took us years to make this turn.

- Finally it’s disruptive because you have to be comfortable in the state of “blowing in the wind”. Typical enterprise companies built loyalty through ridiculously expensive upgrades and data that was so locked down you had to syphon your data out discretely if you were thinking about switching vendors. Now you MUST, absolutely MUST deliver a steady flow of functionality and make your data available and accessible via standard web protocols. That’s a scary situation for many established vendors. It’s disruptive because that’s what our customers want. That’s what we are giving them. But many won’t.

3. What is the next big thing in Cloud Computing?

(AR): The intersection of consumer applications (more than just social) into Enterprise data. SaaS and cloud moved your data to the [potentially] accessible cloud. Soon it will be about making sense of all that data in the cloud. So Enterprise SaaS vendors will be forced to make their data accessible. That’s uncomfortable position for many traditional enterprise software companies who always felt the “hoarding” of their data is what kept customers paying their maintenance bills. So now the data must be “freed” and accessible through standard formats. And not only that, just like Gen X/Yers started bringing iPhones and Skype into the Enterprise without “permission”, we will need to be able to mash our Enterprise data up with consumer applications (especially social). Why not allow identity management via Facebook?

For example, take Apple with iOS5 is delivering their notification center — one place for the person to direct all their important action items. It is our job to plug into that if the user wants us too. Same with social streams. People don’t want 10 different streams, they might want a couple… so how do we publish and subscribe into those places where a user already works. Instead of taking an application-centered view, it is time to take a person-centered view. Cloud lets us do that.

4. What are you doing that’s disruptive for Cloud Computing?

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Tuesday’s Tip: Apply Maslow’s Hierarchy Of Needs To C-Level Business Strategy

Published on December 27, 2011 by R "Ray" Wang

Maslow’s Hierarchy Of Needs Provides Prioritization Of An Individual’s Needs

In 1943, Abraham Maslow put forward his paper A Theory of Human Motivation. Eleven years later in 1954, Maslow went into detail on his hierarchy of needs in his book titled Motivation and Personality. The framework outlined five needs from the most fundamental or “deficiency needs” at the bottom and ended in Meta motivational needs towards the top (see Figure 1.).  At the highest level – self-actualization, the individual would focus on the needs to better society.

Figure 1. Maslow’s Hierarchy Of Needs

Source: Wikipedia

A Business Hierarchy Of Needs Provides A Model To Prioritize Business Strategy

While Maslow’s research explained what would drive and motivate individuals, applying the model to organizations yields a powerful framework for business prioritization. Why? Today’s next gen C-level executives face an onslaught of business priorities that must address the organization’s basic needs from regulatory compliance to higher level needs that include the management of the brand.  The business hierarchy of needs uses an analogous framework to Maslow’s.  Using the framework, business priorities and related projects can be aligned with the five levels that include (see Figure 2):

  1. Brand. The brand describes a promise to stakeholders. The brand is more than the collection of products or services offered by the company.  The brand encompasses an emotional value, an aspiration, and the public face of a business strategy.  The brand can be viewed as a person, product, organization, and symbol for the company.
  2. Strategic differentiation. Organizations seek strategic differentiation to achieve a desired reputation, create a defensible competitive advantage, and influence preferential behaviors in the value chain.  Tools include positioning strategy, design thinking, and innovation programs.
  3. Revenue growth. Revenue growth reflects the initiatives used to drive new customers, revenues, and market share for the organization.  Revenue growth is also known as top line priorities.
  4. Operational efficiency Operational efficiency priorities focus on reducing costs, improving existing performance, and optimizing existing landscapes.  Operational efficiency is also know as bottom line priorities.
  5. Regulatory compliance.  Regulatory compliance is a base need.  Organizations must comply with legal requirements.  In addition, organizations may want to avoid legal suits, causing injury, or failing to meet a commitment.

Figure 2. Constellation’s Business Hierarchy Of Needs

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Research Report: Constellation’s Research Outlook For 2011

Published on January 4, 2011 by R "Ray" Wang

Organizations Seek Measurable Results In Disruptive Tech, Next Gen Business, And Legacy Optimization Projects For 2011

Credits: Hugh MacLeod

Enterprise leaders seek pragmatic, creative, and disruptive solutions that achieve both profitability and market differentiation.  Cutting through the hype and buzz of the latest consumer tech innovations and disruptive technologies, Constellation Research expects business value to reemerge as the common operating principle that resonates among leading marketing, technology, operations, human resource, and finance executives.  As a result, Constellation expects organizations to face three main challenges: (see Figure 1.):

  • Navigating disruptive technologies. Innovative leaders must quickly assess which disruptive technologies show promise for their organizations.  The link back to business strategy will drive what to adopt, when to adopt, why to adopt, and how to adopt.  Expect leading organizations to reinvest in research budgets and internal processes that inform, disseminate, and prepare their organizations for an increasing pace in technology adoption.
  • Designing next generation business models. Disruptive technologies on their own will not provide the market leading advantages required for success. Leaders must identify where these technologies can create differentiation through new business models, grow new profit pools via new experiences, and deliver market efficiencies that save money and time.  Organizations will also have to learn how to fail fast, and move on to the next set of emerging ideas.
  • Funding innovation through legacy optimization. Leaders can expect budgets to remain from flat to incremental growth in 2011. As a result, much of the disruptive technology and next generation business models must be funded through optimizing existing investments. Leaders not only must reduce the cost of existing investments, but also, leverage existing infrastructure to achieve the greatest amount of business value.

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Research Report: 2011 Cloud Computing Predictions For Vendors And Solution Providers

Published on December 28, 2010 by R "Ray" Wang

This blog was jointly posted by @Chirag_Mehta (Independent Blogger On Cloud Computing) and @rwang0 (Principal Analyst and CEO, Constellation Research, Inc.)

Part 1 was featured on Forbes: 2011 Cloud Computing Predictions For CIO’s And Business Technology Leaders

As Cloud Leaders Widen The Gap, Legacy Vendors Attempt A Fast Follow
Cloud computing leaders have innovated with rapid development cycles, true elasticity, pay as you go pricing models, try before buy marketing, and growing developer ecosystems.  Once dismissed as a minor blip and nuisance to the legacy incumbents, those vendors who scoffed cloud leaders now must quickly catch up across each of the four layers of cloud computing (i.e. consumption, creation, orchestration, and infrastructure) or face peril in both revenues and mindshare (see Figure 1).  2010 saw an about face from most vendors dipping their toe into the inevitable.    As vendors lay on the full marketing push behind cloud in 2011, customers can expect that:

Figure 1. The Four Layers Of Cloud Computing

General Trends

  • Leading cloud incumbents will diversify into adjacencies. The incumbents, mainly through acquisitions, will diversify into adjacencies as part of an effort to expand their cloud portfolio. This will result into blurry boundaries between the cloud, storage virtualization, data centers, and network virtualization.  Cloud vendors will seek tighter partnerships across the 4 layers of cloud computing as a benefit to customers.  One side benefit – partnerships serve as a pre-cursor to mergers and as a defensive position against legacy on-premises mega vendors playing catch up.
  • Cloud vendors will focus on the global cloud. The cloud vendors who initially started with the North America and followed the European market, will now likely to expand in Asia and Latin America.  Some regions such as Brazil, Poland, China, Japan, and India will spawn regional cloud providers. The result – accelerated cloud adoption in those countries, who resisted to use a non-local cloud provider.  Cloud will prove to be popular in countries where software piracy has proven to be an issue.
  • Legacy vendors without true Cloud architectures will continue to cloud wash with marketing FUD. Vendors who lack the key elements of cloud computing will continue to confuse the market with co-opted messages on private cloud, multi-instance, virtualization, and point to point integration until they have acquired or built the optimal cloud technologies.  Expect more old wine (and vinegar, not balsamic but the real sour kind, in some cases) in new bottles: The legacy vendors will re-define what cloud means based on what they can package based on their existing efforts without re-thinking the end-to-end architecture and product portfolio from grounds-up.
  • Tech vendors will make the shift to Information Brokers. SaaS and Cloud deployments provide companies with hidden value and software companies with new revenues streams.  Data will become more valuable than the software code. Three future profit pools willl include benchmarking, trending, and prediction.  The market impact – new service based sub-categories such as data-as-service and analysis-as-a-service will drive information brokering and future BPO models.

SaaS (Consumption Layer)

  • Everyone will take the SaaS offensive. Every hardware and system integrator seeking higher profit margins will join the Cloud party for the higher margins.  Software is the key to future revenue growth and a cloud offense ensures the highest degree of success and lowest risk factors.  Hardware vendors will continue to acquire key integration, storage, and management assets.  System integrators will begin by betting on a few platforms, eventually realizing they need to own their own stack or face a replay of the past stack wars.
  • On-premise enterprise ISVs will push for a private cloud. The on-premise enterprise ISVs are struggling to keep up with the on-premise license revenue and are not yet ready to move to SaaS because of margin cannibalization fears,lack of   scalable platforms, and a dirth of experience to run a SaaS business from a sales and operation perspectives. These on-premise enterprise software vendors will make a final push for an on-premise cloud that would mimic the behavior of a private cloud. Unfortunately, this will essentially be a packaging exercise to sell more on-premise software.  This flavor of cloud will promise the cloud benefits delivered to a customer’s door such as pre-configured settings, improved lifecycle, and black-box appliance. These are not cloud applications but will be sold and marketed as such.
  • Money and margin will come from verticalized cloud apps. Last mile solutions continue to be a key area of focus.  Those providers with business process expertise gain new channels to monetize vertical knowledge.  Expect an explosion of vertical apps by end of 2011.  More importantly, as the buying power shifts away from the IT towards the lines of businesses, highly verticalized solutions solving specific niche problems will have the greatest opportunities for market success.
  • Many legacy vendors might not make the transition to cloud and will be left behind. Few vendors, especially the legacy public ones, lack the financial where with all and investor stomachs to weather declining profit margins and lower average sales prices.  In addition, most vendors will not have the credibility to to shift and migrate existing users to newer platforms.  Legacy customers will most likely not migrate to new SaaS offerings due to lack of parity in functionality and inability to migrate existing customizations.
  • Social cloud emerges as a key component platform. The mature SaaS vendors that have optimized their “cloud before the cloud” platform, will likely add the social domain on top of their existing solutions to leverage the existing customer base and network effects.  Expect to see some shake-out in the social CRM category. A few existing SCRM vendors will deliver more and more solutions from the cloud and will further invest into their platforms to make it scalable, multi-tenant, and economically viable.  Vendors can expect to see some more VC investment, a possible IPO, and consolidation across all the sales channels.

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Trends: 2011 Cloud Computing Predictions For CIO’s And Business Technology Leaders

Published on December 27, 2010 by R "Ray" Wang

This blog was jointly posted by Chirag Mehta (Independent Blogger On Cloud Computing) and R “Ray” Wang (Principal Analyst and CEO, Constellation Research, Inc.)

Cloud Adopters Embrace Cloud For Both Innovation and Legacy Optimization

Once thought to be the answer to deployment options for just the SMB market, early cloud adopters proved otherwise.  Stereotypes about industry, size of company, geographies, and roles no longer hold back adoption.  Cloud adoption at all 4 layers of the cloud passed the tipping points in 2010 as a key business and technology strategy (see Figure 1).  For 2011, we can expect users to:

Figure 1. The Four Layers Of Cloud Computing

General Trends Reflect Natural Maturation Of The Cloud Market

  • Replace most new procurement with cloud strategies.  Preference in deployment options and lack of availability of innovative solutions in on-premises options will result in a huge shift for 2011.  Add capex swap out for opex, and most CFO’s will be singing the praises of Cloud along with the business and IT leaders.
  • Start with private clouds as a stepping stone to public clouds.  Conservative CIO’s looking to dip their toes into cloud computing will invest into private cloud while evaluating the public cloud at the same time.
  • Get real about security. Customers will move from “the cloud is not secured” to “how can security be achieved in the cloud?”.  They will start asking real questions about security.  The result — cloud vendors must further showcase various industry-specific compliance approaches.
  • Move to private clouds as a back up to public clouds.  Forecasts in cloud security breaches will call for partly cloudy cloud adoption.  Despite the woes in on-premises security and the march to the cloud, cyber attacks will force companies to mov e from public clouds to private clouds in 2011.  Concern about cyber gangs hacking into commercial and military systems leads to a worldwide trend that temporarily reduces public cloud adoption.  Hybrid models for apps in the public cloud and data in the private cloud emerge as users migrate from on-premises models.  Data integration and security rise to key competencies for 2011.  The bottom line – improved data security reliability will drive overall cloud adoption in the latter half of 2011.  Organizations will keep private clouds for both security and back up.

SaaS (Consumption Layer) Emerges As The Primary Access To Innovation

  • Begin the transition from best of breed purpose built solutions to cloud mega stacks. Customers will still need stacks to be augmented by best of breed purpose built solutions.  As with the early days of ERP and CRM, expect su ite consolidation to occur for SaaS apps vendors.   However, the vendors with both the best PaaS platform and ecosystem will win.  Mature cloud customers will bet on several emerging platforms and apps as well as content driven cloud platforms complemented by strong integration solutions.  Access to deep industry vertical solutions will play a key role in this migration.  The need to quickly innovate will hasten SaaS adoption.
  • Superior user experience and scale won’t be mutually exclusive. The customers, especially the line of businesses (LOBs) will demand superior user experience as well as the scale in the SaaS applications and the tools that they will use. Ease of use will be on top of the list while evaluating a SaaS application and will help the SaaS vendors win a deal against on-premise incumbents whose products may have more features but poor user experience.

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Event Report: 2009 SAP Influencer Summit – SAP Must Put Strategy To Execution In Order To Prove Clarity Of Vision

Published on December 11, 2009 by R "Ray" Wang

Boston Park Plaza Lobby nTag at SAP Summit Schwarz and Becher The Future Leadership of SAP?
(Photos by R Wang & Insider Associates, LLC.   Copyright © 2009 All rights reserved.)

Re-innovation Now At The Heart Of SAP’s Focus And Strategy

SAP has faced a rough two years.  From the continuing market pressure on new license revenue, false-start launch of Business By Design (ByD), management restructuring, and issues with user groups and Enterprise Support, one could kindly say its been a brutal period.  Looking forward to a fresh start in 2010, senior executives and key personnel have been hard at work “re-innovating” SAP at both the product and marketing level.  As intended, many of the 275 analysts, bloggers, customers, influencers, and media attendees of this year’s SAP Influencer Summit left Boston with the perception that the company is in the midst of such transition. However, the clarity of that message and the perception of innovation depended on the topic at hand.

Five key themes drove most formal and informal conversations throughout the event:

  • SAP continues to be innovative. John Schwarz, SAP Executive Board Member, keynoted on stage that ” We are not your grandmother’s SAP” and addressed SAP’s aspiration to become more customer focused and innovative.  Jim Hagemann Snabe, Executive Board Member in charge of Business Technology and Solutions, touted the product vision.  Vishal Sikka, SAP’s Chief Technology Officer (CTO) focused his conversation on Timeless Software and SAP’s cloud orientation.  He emphasized the size of future data volumes and the case for why In-Memory applications would provide the access speed and key meta-data required to draw inference for usage in business intelligence and analytics.  Meanwhile, John Wookey, who leads SAP’s OnDemand for Large Enterprise effort commented on the Cloud by stating, “SAP sees On-Demand as the next major change in computing models and we’re very serious about on-demand. Innovation in on-demand (deployment options) is still largely in front of us.”

    Point of view (POV): SAP’s working hard to highlight its innovations.   With €1.6B spent a year in R&D, innovation exists in SAP Labs but management and tribal politics often keep good ideas from becoming productized.  Users will need to work closely with SAP to identify needs and requirements and help SAP prioritize what should go to market.  Cloud strategy remains hazy in specifics. In-memory approach will benefit customers but will take time to develop across all products.  OnDemand for Large Enterprises could slow in-roads by pure-play SaaS vendors.

  • Business analytics and intelligence play a key role in the platform. Executive Vice-President and General Manager, Marge Breya spent much time talking about SAP’s support for heterogeneous data sources.  As the BOBJ assets integrate into NetWeaver, her emphasis would be to deliver information across new platforms and use cases.  Project Kona for business intelligence (BI) OnDemand in mobility would play a key role in changing how users access SAP information.

    POV: Customers need better information in order to make key decisions.  BI plays a significant role in delivering such value to customers and the Business Objects acquisition provides the enabler.  However, SAP users still find data quality and data governance to be a key hole in the SAP information strategy.  SAP will need to address the different approaches in master data management (MDM) and help customers understand which set of tools should be applied in each customer scenario.

  • Future growth rests with success in small and medium enterprises.  With most of the large enterprise saturated with packaged apps such as ERP, SAP’s future growth rests on its ability to move down market.  The SME team led by Hans-Peter Klaey shared progress on their 3-prong product strategy with Business One (B1), Business All in One (BAiO), and Business by Design (ByD).   B1 continues to gain traction in the small end of the market and SAP has published a product road map well past 2014.  The key issues remain the future of ByD and how SAP plans to scale growth.

    POV: With hopes of getting ByD to scale, Feature Pack 2.5 promises to bring in-memory analytics, multi-tenant support, mobile device enablement, Microsoft Silverlight UI’s, and a software development kit based on Microsoft Visual Studio.  Scaling remains a big issue but now becomes technically feasible.  Conversations with Rainer Zinow, Senior Vice President for SME Strategic Solution Management; Christoph Behrendt, Senior Vice President for Midsize Enterprises; Peter Lorenz, Senior Vice President, SME Solutions; Jeff Stiles, Senior Vice President for SME Marketing; and others, highlight the advanced progression in SAP’s SME thinking.   Early indications show promise that they will eventually approach the market with the right scaling, go to market plan, and cost structure to succeed. Movement towards more Microsoft technologies will help attract B1 partners, especially many at Sage who may be disgruntled but technically competent and customer service oriented.

  • Sustainability is more than a trend.  Building on its Clear Standards acquisition, SAP continues to drive mind share in the field of sustainability tracking.  Key topics include the usual suspects of carbon emissions, energy consumption, and compliance. The Business Objects Sustainability Performance Management offering showcased new areas such as product and workplace safety.  Its recent Sustainability Report highlights how SAP uses its own software to achieve its corporate objectives.  Sustainability shows growth as a board-level topic and issue of concern.

    POV: More than just buzzwords, SAP’s making a considerable investment in sustainability.  By providing the right templates and KPI’s for external reporting, SAP will transform social responsibility aspirations to reality for its interested customers.   Peter Graf, SAP’s Chief Sustainability Officer, has harnessed the do-good spirit of SAP’s employees in building out SAP’s offerings.  Expect sustainability to be a key area in repairing SAP’s current image.  Conversations with customers indicate that sustainability may not be a primary reason to choose SAP today, but SAP’s investment and commitment in this arena brings SAP into conversations with key business leaders and has led to deal flow.  However, long term success in sustainability will require good master data management (MDM) and SAP must rapidly address this issue or face the prospect of false promises.

  • Partners and ecosystems matter. The partner ecosystem team continues to evolve and innovate with new programs that not only attract new partners, but also improve partner readiness.  SAP currently works with 7000 go to market partners and the SAP Developer Network boasts 2.5M developers.  Efforts such as the SAP Mentor program, SAP Partner Edge, SAP EcoHub, and SAP Community Network by Zia Yusuf and his successor, Singh Mecker, Senior Vice President of GEPG provide proof points of progress and success.

    POV:     The EcoHub provides customers, partners, suppliers, and internal employees with a collaboration point for subject matter experts, trouble shooting, and fostering community.  SAP’s partner ecosystem remains its strongest asset.  In order to capitalize on their success, SAP must make the necessary investment in revamping the technology platforms partners build on.  Should they fail in providing an easier platform, they will lose traction and adoption.  Partner-led innovation will move to easier platforms to work with and business models that sustain profitability.

SAP’s Efforts In Strategy To Execution Rates A “B-” For Now

Applying a quick Vendor Scorecard grading system, here is a subjective evaluation of SAP’s 2009 efforts to date*:

  • Leadership: “B-”. Leo Apotheker and Bill McDermott failed to show up again at a key event.  While this was Q4 and a tough quarter, customer and influencer perceptions remain low on Leo given his decision to push Enterprise Support and the lack of clarity into his vision and approach to date.  To be fair, he has faced a tough hurdle in cleaning up mistakes from his predecessor, Henning Kagermann, and has had to streamline research and development as well as a sprawling bureaucracy.  The good news – their absence highlighted the emerging bench strength of talent within SAP.  This brought some confidence to many in attendance that SAP may have the right stuff to emerge. The bad news – rumors abound on when a successor (Co-CEO) would be announced as Leo’s contract expires in June 2010.
  • Product strategy: “B+”. Sustainability, integration of Business Objects componentry, Enhancement Packages (EhP), and In-Memory apps receive praise.  Meanwhile, adoption of ERP 6.0, remains slow.  SAP cites 50% of all product instances on to ERP 6.0.  However, actual customer counts may be less given the fact some customers have 25 to 50 instances of SAP.   Only 3500 customers have used Enhancement  Packages.  Customers remain confused on the value of Business Suite 7, upset with paying twice for BW and Business Objects, and disappointed with SAP’s slow approach to SaaS and onDemand.  Successful relaunch of ByD in 2010 may help SAP gain traction.  Customers await delivery on OnDemand offerings for Large Enterprise but can not wait much longer.  InMemory Apps planned for 2014 must be delivered on-time to compete with Oracle’s Fusion Apps.  Despite the lack of clarity, SAP still has the richest set of business functions and ability to handle the greatest set of complex scenarios.
  • Technology strategy: “C+”. Middleware strategy remains murky at best.  SAP should revamp NetWeaver or junk it.  NetWeaver is to Blackberry as Salesforce.com’s Force.com is to iPhone.  It’s so much easier to build apps on Force.com and iPhone than it is for SAP’s NetWeaver and RIM’s Blackberry.  The decision to emphasize the NetWeaver ABAP stack over the NetWeaver Java stack will leave customers and partners confused despite how much more efficient it is to build on ABAP.  In addition, the lack of good business process orchestration at both run time and design time remains a critical hole for investment and gives vendors such as IBM and Cordys opportunities to sit on-top of SAP apps.  Mobile strategy at first seems less emphasized with the rare mention of native apps development on Blackberry and other platforms.  Nevertheless, SAP’s decision to leave mobile platform integration of Blackberry and others at the NetWeaver Mobile layer may prove to be the most efficient and effective approach.  The move to in-Memory will help with future development, yet customers lack confidence in SAP’s execution of the Timeless Software argument, despite its best intentions.  It appears that SAP will have 2 OnDemand strategies.  Lighter applications will be built on Java.  More complex applications to be built on the OnDemand stack.
  • Go to market strategy: “B+”. “Best Run Now” packages deserve credit for bringing business value from analytics into core business processes.  Slow adoption can be blamed on a sales teams who treated this as a new license sales opportunity instead of an entry point to showcase SAP value.  Customers could see the sales reps salivating with each interaction for a new sale.  Kudos go to SAP for finally admitting failure with ByD and working hard with customers and partners to revamp efforts.  SAP’s marketing team remains the most innovative and effective.  Just wait till they get products that keep up with their marketing.
  • Innovation agenda: “B-”. SAP’s making in-roads in the right areas.  Project Constellation, integration with Google Wave, and social networking investments highlight some movement towards disruptive technologies.  SAP must rapidly productize innovations from the SAP Imagineering team, worldwide SAP Labs, SAP COIL, and its consulting partners.   SAP needs to tap into its ecosystem and bring out innovation.
  • Service and support: “C+”. Customers continue to self-support and question SAP’s value.  As more customers consider third party maintenance, SAP will have to fight harder to demonstrate value.  On the positive front, SAP’s Value Academy shows promise in helping customers optimize their SAP investments.  Initial discussions with Chakib Bhoudary, SAP’s Chief Value Officer, indicate the deep level of experience and data provided.  Customers will want to see how to access these services with minimal investment or redirected maintenance investment.
  • Customer satisfaction: “C+”. Conversations with over 400 customers in 2009 highlight severe disappointment with their SAP relationship.  Sales reps compensated on net new license sales no longer invest in guiding customers through the SAP offerings.  Customers fail to adopt due to lack of knowledge.  They no longer trust their SAP sales reps nor do they have high confidence in the system integrators to guide them to the most cost effective solution.  SAP sales reps need to understand their products better.  Those customers who are able to make a trip to Walldorf (WDF), find solace that the old SAP still exists with passionate and dedicated engineers.  Customers appreciate the honesty in WDF about what can or can not be accomplished with SAP.  However, this is not a scalable model for SAP.  SAP will need to retrain and reincentivize its sales reps.  Applying social enterprise methods to the great SAP ecosystem may prove to be fruitful in scaling out more personalized approaches.
  • Execution to date: “C-”. Failures abound in execution in Enterprise Support, NetWeaver adoption, ByD roll-out, Duet usage, and Solution Manager capabilities.  SAP’s current state is similar to Microsoft’s prior to the launch of Bing and Windows 7.  SAP needs a success story soon to not only raise morale, but also gain customer confidence in its ability to deliver.  Jim Hagemann Snabe’s efforts at streamlining and centralizing development provides at least a positive indicator.
  • Partner ecosystem: “A”. The team has built one of the best technology partner ecosystems in the market.  The emphasis on community outreach, influencer participation, and investment in a partner’s success continues to be a differentiator.  SAP’s ecosystem strategy should be credited with saving SAP during this round of crisis.  A move towards Microsoft technologies such as SharePoint and Silverlight will help in gaining developer traction and adoption.  Fix NetWeaver and the ecosystem will have a tool they can innovate from.
  • Overall reputation: “B”. SAP carries significant brand presence in emerging markets and the SME space.  Many companies equate ownership of SAP as a sign of success in their markets.  Yet, existing customers have soured on the brand and continue to wonder when SAP will innovate in their requirements and not be distracted by other pursuits.  In general, SAP still carries considerable brand equity which will buy it time as it reinnovates.

* A=4.0, A-=3.7., B+=3.3, B=3.0, B-=2.7, C+=2.3, C=2.0, C-=1.7, D+=1.3, D=1.0, D-=0.7, F=0

The Bottom Line  – SAP’s Turning The Corner

Credit must be given to SAP for charting a new course.  A shift in the management philosophy and product direction will take years to realize, however, its not too late for change.  SAP must remember its roots and become more German and less American.  The renewed focus must put customer requests and priorities ahead of SAP’s bureaucracy.  The emphasis must focus on the relationship.  When that reemerges in how SAP works with customers, partners, influencers, and its own employees, SAP will be back in good graces.  In the meantime, it’s  time to get to work and deliver.  Oracle’s Fusions Apps are coming soon and competitors such as IBM, Microsoft, Epicor, IFS, and SalesForce.com will not relent.

Your POV.

If you get a chance, let us know:

  • Which SAP products do you use?
  • What do you think about the progress with SAP?
  • Are you considering alternatives to SAP?
  • Do you feel SAP is innovating fast, ok, or slow enough?
  • What do you think of SAP’s new reinnovation strategy?

Feel free to post your comments here or send me an email at rwang0 at gmail dot com or r at softwareinsider dot org.

Other related links and good resources

SPECIAL: Video clips from the SAP Influencer Summit from SAP

20091211 ZDNet Software & Services Safari – Brian Sommer “SAP Business ByDesign Update: Multi-tenancy, In-Core Memory DB and More”

20091211 MichaelFauscette.com – Michael Fauscette “SAP Coming Out From the Clouds”

20091210 ZDNet Collaboration 2.0 – Oliver Marks “SAP: The clear path forward for the supertanker…”

20091209 ZDNet IT Project Failures – Michael Krigsman “Is on-premise ERP obsolete?”

20091209 ZDNet Social CRM: The Conversation – Paul Greenberg “SAP Business Influencers Summit: A Clear Path Forward?”

20091209 Spend Matters – Jason Busch “SAP Influencer Summit, Dispatch 1: On-Demand Differentiation and Vision”

20091209 Monkchips – James Governor ” SAP: Out with the Old, Shrugging off the Tag”

20091209 Merv’s Market Strategy For IT Suppliers – Merv Adrian “SAP Promises Acceleration on a “Clear Path” – Will it Be Enough?”

20091209 CIO Reinvented Blog – Prasanth Rai “Interesting Data/Statistics About SAP…(Influencer Summit)”

20091209 DealArchitect – Vinnie Mirchandani “SAP and The Boston Park Plaza”

20091209 Cloud Avenue – Zoli Erdos “Twitter in the Enterprise – Round 56745327″

20091208 ZDNet IT Project Failures – Michael Krigsman “SAP Influencer Summit: First Impressions”

Copyright © 2009 R Wang and Insider Associates, LLC. All rights reserved.

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