Vishal Sikka on SAP’s Challenges, Futures, and Realities

The odds of sitting down with a senior executive of a major technology company and being surprised and enlightened are one in a million because typically they sit down with a prepared agenda and, with the benefit of years and years of media training, religiously stay on message turning every question back to the thing they want to talk about.

On Wednesday Vinnie Mirchandani, Oliver Marks and I sat down with my old friend Vishal Sikka, CTO of SAP at the Fortune Brainstorm Tech event in Pasadena for a discussion that was free wheeling and definitely without the benefit of a script, meaning it was actually interesting. The fact that Vishal is one of the smartest and most level headed people you will ever have the privilege of meeting no doubt played a big part in why our lunch meeting was so engaging.

Vishal has a tough job because he is responsible for charting the technology roadmap for a company that prides itself on being innovative yet is faced with the reality that their customers want stability and continuity. In Vishal’s own words, SAP’s customers want the company to be like a night watchman who ensures that everything is safe and secure when no one else is watching.

At the heart of this night watchman metaphor lies the fundamental criticism levied against the company, and others like them, which is that despite their vigorous pronouncements to the contrary, the fact is that they won’t change, dramatically lower the cost of their solutions, or embrace third party offerings that are better than their own products. I am sure that there is some truth to this but like other mature industries with a small cluster of dominant vendors, I’m not sure it really matters to customers.

The problems that SAP, Oracle and Microsoft are solving are complex and massively consequential; Vishal made the comment that SAP is at the center of more global trade than any other company on earth and I have little reason to doubt that but with that realization comes significant responsibility that goes well beyond the legal dance called compliance.

The financial industry is the ultimate example of a modern industry that exists because of technology, the ability to exploit information latency for profit as a result of massive processing capacity and well honed software algorithms… but with that immense power the ability for the oldest of human motives, greed, to corrupt is exponentially greater than at any time in history and we now live with what feels like ritual boom and bust cycles as a result. Ironically, we now have a new class of financial software applications that act as circuit breakers to essentially slow down automated trading that can wreak havoc in a market on any given day.

When I confronted Vishal with the above observation and applied it to supply chain rather than financial markets he acknowledged the problem and made an interesting that global trade is a great human equalizer and when nations intertwine economically they are inherently less prone to making war with each other. His point is valid, that whatever damage any bad actors can do with technology, the benefits far outweigh the downsides, a fact that is hard to disagree with.

In the years ahead I think I am on solid ground in suggesting that companies like SAP will come under increasing scrutiny to provide not only full compliance offerings and features, but also overarching transparency that exposes more of the underbelly that all organizations have.

The point about transparency is something that Vishal brought up in our conversation, his exact quote was “radical transparency that reinforces clarity of purpose”. The question that prompted this was based on the observation that unlike Oracle, SAP has always been obsessively consensus oriented, which is really difficult to sustain when involving innovations that have the result of reducing the power of individuals who are expected to grant consensus.

In such an environment how do you breed a generation of leaders who balance risk, customer expectations, commitment to excellence, and financial returns against their own personal agendas? I don’t think you do but Vishal made the point that it’s essential to not forget where you come from, which is just another way of saying you have to always keep in the forefront what your core business is and what it is that has made you successful in that over the years. This ties back to the night watchman metaphor because Vishal is right to assert that SAP’s customers don’t want them chasing every new trend that emerges, in the process foisting upon them disruptive and expensive change for benefits that are still largely promises.

What this does mean is that SAP can often be late to the party or resisting of developments that others have pioneered, but that tradeoff doesn’t seem to bother Vishal very much. A potentially more damaging consequence is that because, as has been said before, “when you are SAP every new market is a niche” and that allows oxygen for other companies to develop offerings that shape the market to SAP’s detriment. I don’t think SAP is alone in this regard, the same could be said of Microsoft, but the question must remain at the forefront of Vishal’s thinking as he is responsible for all of the self-described innovation groups at SAP.

It really is a treat to talk with Vishal, there are few people in his stratosphere who bring his smarts, rational perspective on the market, and most of all, a confidence in what he is good at that never crosses over to arrogance.

PS- I have more notes that cover Vishal’s thinking on cloud computing, the analytics market, enterprise 2.0 technologies, and much more. Rather than cover everything in one post, I will follow up with several posts on each topic.

SAP’s Community Experiments

UPDATE: Jevon pointed out that the links require reg… I’ll check into that because I thought that these were all public.

SAP Global Marketing invited a bunch of people to participate in a meatspace and virtual space community event this week. There’s lots of good stuff going on, indeed, I am finding the blog postings, presentations, and other materials to be really interesting.

This is a great example of how a company can use online community spaces to enhance and involve participation from a wide range of people.

In my copious spare time <g> I have been writing a blog on the Plexus site called “A Former Insider’s Guide“.

Harmony When It’s Delivered

I wrote about Harmony over a year ago… it’s absolutely criminal that something this interesting couldn’t get developed and into customer hands more quickly. Dan has a good post about this innovative product project.

SAP doesn’t yet offer Web 2.0-style social networking capabilities in its solutions that tap into the wisdom of employees, partners and customers, but it has an internal service, called Harmony. Dennis Moore, general manager of emerging systems, called it a "MySpace for the enterprise," speaking at SAP Sapphire in Atlanta.

Too bad Dennis wasn’t talking about this at Sapphire LAST YEAR instead of sitting on it for a full year while the space really lit up. Linkedin is doing something like $15+ million a year in revenue, and growing fast, with their service yet SAP stood around and ignored something that went right to the core of what HR systems are supposed to enable: people development. The big HR systems vendors could own this space if they could see that HR systems are about a lot more than managing transactions and "talent management" systems that average people can’t figure out how to use anyway.

"Harmony features are expected to make their will make their way into the SAP’s Netweaver collaboration portal this year”

And that means what, exactly?

BTW, I did get an invitiation to attend Sapphire as a blogger this year, which was kind of a headtrip to be really honest. I decided not to go because of some travel issues and because I’m just not that motivated to write about SAP at the moment. Need some more time and distance to get my perspective back. Nonetheless, I appreciated the invitation and regret not being able to hang out with my Enterprise Irregulars brethen.

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Shai Agassi Resigns – WOW

Wow is all I can say, didn’t see that one coming at all. In fact, given Shai’s position and the perks that it afforded I figured he would stay even though Leo would ultimately get the CEO position. Speaking of Leo, what the hell is “Deputy CEO“? Has anyone ever heard of such a title? Is it a European thing?

SAP is a complex culture and an even more complex organization, I suspect a lot of people will view this as Palo Alto vs. Walldorf, or the Return of Zencke, but the reality is far less dramatic. The bottom line is that life will go on, the depth of the bench will reveal itself, as Josh Greenbaum details in his post. Snabe and Merritt are both exceptional leaders and already well entrenched in their roles.

Doug Merritt, currently an EVP at SAP in Palo Alto, will get the lion’s share of global responsibility for product, and will take ownership of Duet, GRC, and some of the other successes that Agassi helped initiate. Jim Hagemann Snabe, will take over responsibility for the MySAP suite, and in general get a much-deserved higher profile in the company. Peter Graf will gain an elevated position in global marketing. I’ll profile some of the other changes as they become known. Other power-hitters, like Leo Apotheker, Kraus Kreplin, Peter Zencke, and others are staying put or moving into more important roles

As for Shai, the comments in the WSJ about him doing clean tech are pretty interesting, I really wasn’t aware that he had such a high level of interest in such things, but hey after you hang out with the Davos set I guess you just kind of get into that kind of thing whether you intended on it or not. Maybe “leaving to pursue clean technology” is the updated, more believable, version of “leaving to pursue other interests and spend more time with family”.

I’ve been wrong more than right on my SAP predictions of late, but as a friend told me just today “well at least you make them!,” so take this as completely unsubstantiated and speculative. My bet would be that Shai joins either a venture firm or a buyout fund. I wouldn’t be surprised if it were Kleiner given the relationship with Ray Lane and the emphasis on clean tech, but Shai’s experience and energy would be a real asset to a buyout fund that can do big deals, like Silver Lake.

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Microsoft Acquiring SAP Rumor (again)

There is yet another rumor circulating about Microsoft acquiring SAP, let’s call this one “version 3,453.2″. I’m not that plugged into SAP anymore so take my comments here with that in mind.

To me this makes no sense at all. Sure Microsoft wants to get a bigger piece of the pie in big enterprise accounts and SAP definitely wants to take a bigger slice of SMB. However, let’s not lose sight of the fact that Microsoft has already sunk about $7 billion into Great Plains and Navision, two product lines that more or less perfectly replicate what SAP has with A1S, and at a significant investment as well.

SAP’s stock has taken a pretty big valuation hit given the poor results from the last quarter. Why would SAP sell itself when the stock is off as much as it is and the forecasts going forward are unlikely to breath any life into the stock (which is in itself a reason to sell one could argue but SAP is not sitting still either). Let’s also not forget that even though SAP is a publicly traded company it still does have to agree to sell itself given that the founders control such a large voting stake and EU regulators would definitely come down hard on Microsoft for any hostile move against the company.

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The one part of SAP that reliably generates cash is unfortunately in the part of the market that has little growth. The maintenance part of the business is like an annuity that will generate cash for years to come, but that’s certainly not a good reason to acquire the company when the cost of doing so would be so high. If the part of SAP that is likely to hit some impressive growth numbers, A1S, is a direct overlap of something that Microsoft already has, at great cost, how could they justify an acquisition to their shareholders? Then there is the cultural issues that separate the company, and were identified as a reason for not moving forward when the two companies did acknowledge discussing a merger, and those cultural issues have not dissipated in the 3 years since.

To me this is a non-starter, the announcements to analysts tomorrow are likely to be concerned with currency issues (SAP reports in Euros), guidance adjustment, and/or executive moves. I would not be surprised to see the company announce a succession plan for senior leadership to put to rest media speculation about what Henning is going to do.

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Blogger Relations at Adobe, Oracle and SAP (and a bit of IBM, Microsoft, Sun)

James posted a really good piece on the different approaches that the big vendors are taking with regard to bloggers. There’s one quote in here that I want to highlight and address:

Of course Jeff Nolan was instrumental in getting SAP more blog savvy, but anyone that gives him sole credit for the company’s efforts is on crack. Nolan didn’t singlehandedly change SAP any more than Scoble did Microsoft. These guys are change agents, but they fit within a cultural context. Corporate troublemakers without very understanding bosses don’t last very long.)

He is spot on right with that observation and I’m glad he said it because it brings up the most important thing that large companies can do to be successful with next generation influencer models – embrace the people that make trouble. I couldn’t possibly change SAP because I pissed too many people in power off (it got so bad with Peter Graf that he would barely growl out a “hello” to me in the hallway). I was proud to walk around everyday with “so what, fire me” written on my shirt for everyone to see, and were it not for a lot of people above me who gave me cover and stepped in front of me when the bullets were flying, well we wouldn’t even be talking about it now.

People like Mark Finnern, Thomas Otter, Frank Koehntopp, Mark Crofton, and others are equally culpable in the success that SAP is having with bloggers. Personally, I think Thomas is one of the pre-eminent technology bloggers in Europe and SAP is lucky to have him. Mike Prosceno doesn’t have a blog, but I give the guy a lot of credit for taking me on face value when I told him it would be a really good idea to bring bloggers to Sapphire, and more importantly for putting his resources (Karen and Stacy) on it to make it happen. The logistics and cost for doing events with bloggers is really pretty daunting, if you don’t put the resources into it then it will surely come out half-ass, but SAP is setting the gold standard as far as this is concerned.

UPDATE: I was remiss in not including Charles Zedlewski’s blog in the list of prominent SAP bloggers. Charles is one of the smartest SAP guys in Palo Alto and is tough to beat in an argument.

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Double take

Here’s the headline for the story:

Thanks to Graf, Agassi rackets stay in the family

Now coming from SAP my first thought was not to think of professional tennis.

SAP BusinessOne – the analysis

Dennis put together a thoughtful analysis of SAP’s BusinessOne product offering. For those of you that are not familiar with this product, it is the result of an acquisition we made and features a complete SMB product offering for accounting, MRP, and CRM with additional functionality for retail storefront, logistics and wholesale distribution. I’m not doing it justice, but in all honesty I really don’t know the product that well.

The big ding on B1 is that it is another on-premise solution, and talk of a services-based, presumably hosted, is still just talk, but even that fact doesn’t appear to have slowed the adoption of the product. Another side effect of the fact that this is not a hosted solution is that we have been able to recruit a substantial roster of resellers in a variety of vertical industries, clearly this is something to consider if you are in the mid-market.

AccMan / SAP BusinessOne – the analysis:

SAP can rightly claim it is the only vendor at this time to offer a (near) complete, end-to-end, process driven solution for its target market. E-commerce is sophisticated enough to handle returns and can be set to create POs if there are stock outs plus operate in both B2C and B2B markets.

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Web 2.0 in the Enterprise Think Tank

Today I participated in a “think tank” session organized by SAP Labs and the World Internet Center. In addition to a bunch of my SAP colleagues there were individuals from Google, Zoho, Abgeneal, Dojo, StrkeIron, nStein Technologies, and Socialtext.

This has been a pretty interesting day on a number of fronts, most significantly because it illustrates the challenges of dealing with the theoretical. Compliance, security, reliability, documentation, UI consistency, availability and many more topics move from the academic to the real sense when our customers are trying to implement this stuff, however, all of this reinforces my view that we have a substantial complexity bias in enterprise software. If it’s meaningful we believe it has to be complex. We really have to start thinking about the “good enough” solution instead of falling back on the reasons why something won’t work or will it could fail as reasons not to build it in the first place.

Mashups are a hot topic and the issues facing enterprise vs. consumer markets are substantial. Consumer mashups are essentially data integration in nature – I have a batch of addresses that I map out in google maps. Enterprise mashups are process in nature, I want to hook up my CRM and inventory systems with Ebay and Paypal and then feed the resulting financial data back to my ERP system. This is hard because it’s rule driven as opposed to data driven.

My other observations are rather unsurprising, including the fact that there is heated discussions to be had about the appropriateness of REST for transaction systems, how positive user experiences are achieved, the degree of scale that web 2.0 services can achieve, and tactical objections like security and loss in control.