At the 2009 SAP Influencer Summit in Boston, SAP took the time to provide their 2010 and beyond strategy for their enterprise software and applications business. The event with hundreds of influencers was led and moderated by EVP of marketing, Jonathan Becher provided a balance of humor and insight on the future of technology and the range of what SAP is addressing in the future. I had an opportunity to digest their sessions and meetings to assess SAP impact to the business and technology industry and where they are strategically heading. The core of SAP application business has been under duress over the last year with challenging economic climate has reduced technology spending for enterprise applications. SAP also recognizes their customer’s environment to see how they can help address many of their issues and industry trends like networked business, rising customer power and sustainability as directly impactful to new and future solutions to market. I personally believe these are good but helping business and specific LOB manage their specific areas of responsibility is a top buying agenda outside of IT and is also part of the portfolio of priorities for SAP in 2010. Much of the summit was on the enterprise applications and software strategy of SAP to influence their differentiation and approach compared to other large software providers like IBM, Oracle and even salesforce.com.
SAP has examined their direction since Sapphire and our analysis (See: “SAP Communicates New Clarity for Business at SAPPHIRE“) to look at how they can become more transactional or provide more bite-size solutions for organizations to purchase and deploy in shorter periods of time. Amazingly much of what was presented addresses many of my colleague’s points from the conference (See: “What Léo Apotheker from SAP Should Have Said“). Expanding the volume of business transactions to address the shortfall of larger enterprise size global application license sales evident in their financials is a number one priority at SAP. But this shift requires new executives that are willing to drive change into SAP with no ties to the past approaches which is why newly promoted executives like John Schwartz to executive board, Jonathan Becher to head field and solution marketing and Sanjay Poonen to head global sales of business solutions like EPM and GRC are critical steps to infuse new energy into their strategy and plans. I see the changes in the front office of SAP as critical to find new methods for engaging with customers of all sizes and needs for solutions to address specific business issues.
The direction of SAP product strategy was led by Jim Hagemann Snabe who is a member of the executive board who outlined how they are increasing speed of innovation through four key areas including helping customers scale core business, innovate via extensions to SAP, extend our customers reach and provide the technology orchestration necessary to make SAP efficiently operate in the enterprise and business network. Part of this is to also adjust the range of product and technology strategy is to be more agile than ever before in adjusting to new buyer demands for solutions. This agility is no easy task for a company of SAP culture and legacy for how they operate and manage their customer relationships across vertical industries and the world. SAP is balancing these innovation investments across SAP Business Suite 7 and my previous analysis of this suite (See:”SAP Business Suite 7 – Is the Suite Sweet?“) and SAP BusinessByDesign to range of new areas like business analytics and mobile based applications for range of business and consumers users as also seen in this year’s SAP annual conference. With a direct competitive poke at Oracle and IBM that databases should operate in memory and hardware should be managed in the cloud and instead of acquiring applications and tools with promises to future releases, SAP is modernizing their existing applications which provided a group chuckle but also the seriousness of this competitive battle.
The technology strategy is led by Vishal Sikka who is the Chief Technology Officer at SAP who brings a much different style than predecessors who led the technology discussion including Peter Zencke, Shai Agassi and Hasso Plattner. Vishal discussed the dramatic transition to the execution and management of applications through the use of in-memory computing that can be used for analytical and transactional purposes. This advancement makes the speed of conducting and getting visibility into business much easier than before. In addition the dramatic change in consumers and customers using smart phones also has SAP with new user and technology interfaces to Apple iPhone and Google Android for which SAP demonstrated a range of mobile applications from order visibility to contractor scheduling. Vishal debunked many myths about SAP but most importantly provided plenty of technology demonstrations that provided insight to the future of their technology from accessibility to intelligent management of a company’s physical assets.
The continued expansion of SAP applications strategy and the availability of those applications in private and public cloud computing environments is also how SAP is being adaptive to how organizations want to purchase and deploy them. SAP provided plenty of customer examples on the advancement of their applications into cloud computing including Eric Brown, the CEO of Johnson Products who adopted and deployed SAP BusinessByDesign in 30 days. SAP outlined their roadmap of solutions that will be available in the on-demand and software as a service approach which will advance their applications to more organizations with limited IT resources and consulting services budgets. The on demand strategy for applications was outlined by John Wookey who recently left Oracle as top executive leading their applications strategy providing new energy behind SAP BusinessByDesign as pointed out by my colleague (See: “Business ByDesign is SAP’s Strategic Proof Point“). SAP stated they will be operating in scale and volume to their on-demand applications business in 2010 after a couple of years of re-optimization of their cloud computing based application suite. If this is true and they execute, this will throw a monkey wrench into the activities of others like Workday who have been working through hundreds of millions of dollars to build ERP back office suite for HR and finance from scratch which is still a work in progress but starting to get customer adoption.
SAP does realize the future of their business is in getting larger volume of transactions for their on-premise and on-demand offerings requires a revitalized channel and partner network that is much larger and more dedicated. This go to market and new investment was discussed by John Schwartz and Jonathan Becher who recognize the need and have been executing on a more robust partner ecosystem that can even engage without SAP. These efforts will have to be further proven out as the reputation of SAP is not one that has been called easy or simple. It has worked well for largest of partners who have made significant money on implementation from consulting services with SAP. I am not sure that SAP has all the ‘right stuff’ or incentives yet or maybe not well communicated for the mid-market channel to convert or compliment their existing relationships with Infor, Microsoft and Sage who are also trying to captivate more business through these same channels. The quote from SAP is they are not trying to be the ‘Sun in the Milky Way’ but ‘A Star in the Galaxy’ was indicative of the changes underway inside the organization and that a new SAP partner approach will be front and center in 2010.
SAP realizes that they must focus their efforts and customers to specific solutions and not the acronym suites like ERP, CRM, SCM, PLM and others that are not necessary simple to deploy or low cost to adopt. In fact SAP made it clear that they would like to eliminate the TLA (three letter acronym) soup of the past and focus on the line of business needs by vertical industry. In fact SAP presented their new solution map with TLA which makes this a reality where customers can pinpoint a specific solution need and SAP can bring to bear their approach to that problem. This change could be one of the largest ingredients to getting to the volume of transactions required for getting back to license revenue growth at SAP. It is also required as our research and clients have demonstrated that line of business (LOB) is back in force in their leadership and budget to adopt solutions that meet their specific needs. This shift from CIO centered purchasing in US will help bring more relevance to IT investments but will force vendors like SAP to shift and embrace CFO and LOB more aggressively.
SAP does realize the strategic importance of BI in the industry with their acquisition of Business Objects and expanded efforts to help organizations harvest and use data including that from SAP but also now a broader portfolio of business analytics for LOB areas. The broader need across LOB was not left unsaid as the word analytics was used in almost every presentation and discussion which is not new from the past but now an expanded emphasis as SAP has to face the competitive reality of others who are working to present their approach to leveraging SAP data (See: “Leverage Every Transaction from SAP for BI”). SAP is not sitting still and with a major new release of the BusinessObjects Suite of capabilities to be generally available in the second half of 2010 along with an on-demand BI suite operating in the cloud computing arena that will be available in the first half of 2010 and appears to be quite competitive to niche BI SaaS vendors. These new releases along with other innovations in interactivity, collaboration and mobility will help further SAP BI and analytics business.
The SAP Influencer Summit was not without a massive amount of discussion about the industry and their direction as seen by the Twitter traffic on the hashtag of #sapsummit which brought real time electronic collaboration across industry influencers but also personal engagement with executives on the tough issues facing SAP. This event brought forward a fresh and very receptive SAP to listen to a very large group of influencers more so than in previous years. It is clear from the summit that the enterprise applications market will see distinct strategies from SAP compared to Oracle along with other application providers along with a more distinct competitive edge against IBM and their new set of business analytics and optimization efforts. SAP got the last word in 2009 to the industry influencers with being the last major event including conferences to communicate their approach. Now we will begin to examine the execution and new releases in 2010 for their enterprise software and application industry efforts.
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Mark Smith - CEO & EVP Research