In this report, we'll go over some highlights of last week's Sapphire. In the next, we'll talk more reflectively (and at greater length, alas) about SAP's long-term prospects.
Before an audience of 4000, Henning Kagermann set the tone for the year, not with words, which were forgettable, but with mood and body language. "They've won," whispered a friend of mine as he watched the little lift in Kagermann's step. "We've won," said Kagermann, Apotheker, and McDermott at the crowded press conference later on in all but words.
This is a mistake. SAP may be beating out its current
competition. But SAP's biggest opponent is not Oracle or
PeopleSoft: it is time and the inadequacies of its own product
and organization. SAP's success over the next 10 years will
not be determined by what Oracle does. It will be
determined by its ability to deliver value to its wonderful
customer base. Today, SAP rates no more than a C+ at delivering value,
certainly nothing to strut about.
The immediate cause of Kagermann's optimism was the fact that
companies are focusing once again on growth instead of cost-cutting.
He's right in this; a focus on growth
is good for SAP, because it's always hard to sell people
who are cutting back on the notion of spending money to make money.
With the new climate, Kagermann can at least assert
once again that SAP is providing the leading technological
innovations that companies need to impel growth.
The record doesn't necessarily support this--the vast bulk of their product
set is growth neutral or even (dare I say it?) growth-retarding and
as to innovation, SAP has been a notorious follower
for several years, not a leader. But it's comfortable
ground for SAP, and, who knows,
maybe SAP can start to
make it true.
In this election year, there have been two events
with largely partisan content, and at SAP's their audience
proved to be largely Republican and (perhaps not
coincidentally) one that was comfortable with Kagermann's
assertions about SAP's leadership. The audience seemed to
share his optimism;
there's stuff to do, let's do it, I heard any number of people say.
And stuff is being done, according to several of the SAP
business partners that I talked to.
More than one is staffing up quickly
just to meet current demand and is planning, for the first time in
years, to hire ahead.
The keynote matters; the announcements usually don't. In this
case, only two are worth mentioning:
- SAP and Microsoft are announcing a partnership to develop tools
that will allow
their (competing) application development environments to interoperate
more effectively. Most importantly, .NET users will be able to access
SAP objects; Netweaver developers will be able to acess Microsoft Office
suite. Nothing but praise for this; both companies are serving the larger
developer community and fostering creativity and innovation.
- SAP and IBM will go to market with an end-to-end retail
offering (IBM point of sale systems and SAP merchandising
systems). the goal the first year is $200 million. If they come
close to achieving this through sales of SAP,
it will hurt Retek and JDA materially.
Several people saw this pairing of announcements as a
subtle slap at IBM, which, by all accounts, is a little
irked by Netweaver. More on this in the second piece.
Netweaver, Netweaver, Netweaver
The Netweaver stack may still be virtualware, to some extent, but
Netweaver" was the theme of the conference. At Netweaver presentations, audiences
were standing room only; if you couldn't find a seat, you could
always go to the nearby booth and get your free copy of Netweaver
for Dummies. By contrast, the SRM or CRM theaters were virtually empty.
SAP's vision for Netweaver is a) that it will provide the platform that
will keep the applications living and growing for the next ten years
that it will allow the SAP application set to morph into one that primarily provides applications for
knowledge workers. (Today, most apps are largely meant for clerks.) I'll
give my view of this vision in the next piece. Suffice it to say that
neither Shai Agassi's keynote nor Hasso's really made this clear.
One pressing question--whether Netweaver can generate
revenue for SAP--has been answered in the affirmative. I know of at least
six 8-figure (total revenue) Netweaver deals closed in the last six months.
In an earlier age, many of these would have been called portal deals or
integration framework deals, because the buyer was focusing on that part of the stack. But from what I know, it's fair to say that the notion of a stack and the possibilities that the stack holds out appealed to them and thus it is fair to call them "Netweaver" deals.
Not that every claimed deal is entirely real. I talked recently about future plans to one SAP customer that
Shai listed as a Netweaver client during
his keynote; in the conversation, they never mentioned Netweaver.
For some time, I've thought the xApps
were the most innovative and high-potential part of the stack.
So far, I'm wrong. The xApps that are actually delivered
are by no means numerous; just as disconcerting, the list of
xApps changes every year.
This year, I saw a couple of
xApp demos, which, er, fell well short of adequacy. The
xApps are Agassi's pet; the inability to
get them going does not reflect well on his leadership.
SAP marketing has established the company as a relative
leader in the RFID area. I talked briefly to Claus Heinrich about what they have
done, and it shows you that sometimes, leadership can be gained rather
It's important to understand that there are two kinds of tags:
expensive ($100), rewritable tags, that,
for example, the US Army uses on the pallets it sends to Iraq and cheap,
"slap and ship" tags that are nothing more than a glorified bar code.
(These are the ones Wal*Mart wants on their pallets.)
The excitement (and the complications for enterprise apps) is all around
the cheapies. But for now, SAP is rising above the fray, at least publicly,
on storing information (such as last update) about the expensive tags.
I also got some word on the mysterious Project Vienna from Peter
Zencke, who is in charge of the project. Vienna has been widely
described as SAP's attempt to update the R/3 data model,
and the prevailing wisdom is that it is the successor to Netweaver.
This wisdom is so widespread that it is apparently slowing upgrades,
according to one knowledgeable, neutral observer. Why go to mySAP, people think, why not wait for Vienna?
It is widespread, but according to what Zencke said, it's quite wrong.
Project Vienna is trying to come up with a better technical solution
to a universal problem
in the apps field: the fact that the underlying data structures are not as semantically flexible as they need to be.
To understand that little mouthful, look at Zencke's example.
A "customer" in most business apps is a company. But in retail, a "customer" is usually a person, and in health insurance, a "customer" is a family. For human beings, it is easy to understand that you can't do the same thing with data about companies as you do data about families. But for applications, this is much harder.
Project Vienna envisions a more flexible data structure for "customers," one that allows the application to take into account what kind of being the customer is and what form of relationship is being entered into. This is a difficult, difficult problem; the fact that SAP is addressing this shows how long-term its thinking is and how willing they are to spend on R&D that has little immediate return and no immediate market consequence.
When Bill McDermott took the SAP job, former colleagues were somewhat doubtful
about his abilities to succeed. Well, he's proved them wrong. I asked several
people what accounts for this. A couple of responses:
- Salesmanship. Bill is a good salesman with "exceptional presentation
skills." He goes into top accounts and wins deals.
- Keeping promises. Apparently, when Bill makes a promise to a customer,
he remembers what he says, and he makes sure that the organization comes through.
This is ordinarily not seen as value-added behavior in the software business,
but in his case, the ROI for SAP seems to be positive.
- Sales Organization. "SAP Americas has become a sales-driven organization,
one that knows how to do sales
right. They have too many salespeople, which means that the ones who
aren't working can get dropped quickly. And they've structured things so
that there are million-dollar commissions. That's so much better than
spreading the wealth. Every salesperson just aches to be one of those millionaires."
Bill's success (in an improving American economy) does not bode well
for managers of other SAP country organizations. According to one
of our European correspondents, managers in France, Switzerland, and
one of the Eastern European countries have recently been replaced.
With business cases that show rock-solid ROI now being a prerequisite
for a new sale, SAP now has at least four different organizations or groups
providing ROI tools or services. Kagermann's claims about reducing
TCO would probably be more credible if the organization, from development
on out, had a more coherent approach to
understanding and justifying the value that the applications provide.
As we will see in the next piece on SAP, SAP is not only the leading
provider now, it is the only provider that is devoting significant
resources to making sure that it will be a leader for the next ten years.
This much everybody knows. What seems to be lost in among all the
kudos (and, alas, self-congratulation) is that SAP is still a deeply
flawed company, one whose product and organization delivers far
less value to customers than they should. At this Sapphire, one clearly
saw that SAP wants to do more with its assets and that in some
cases, it is succeeding.
But what I saw did not seem to me to be enough. Over the long run,
SAP is more vulnerable than it thinks it is.
To stay the leader, SAP needs to do even more, and more of what is done needs
to be done
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