Irregular Enterprise

November 23rd, 2009

Fawning over Chatter and how SAP missed its chance

Posted by Dennis Howlett @ 5:50 pm

Categories: Social computing, Social software

Tags: Salesforce.com Inc., SFdC, Sales Force Management, Sales, Dennis Howlett

Ever since Salesforce.com announced Chatter, there’s been a rising crescendo of what I can only describe as fawning and uncritical waffle. It’s worrying.

As I’ve said before, Chatter is ESME with a few bells and whistles. Yet here we have everyone from Scoble to Mike Krigsman praising this as though it represents the second coming of IT. First up Scoble:

First, lots of people, including most of the Enterprise Irregulars who usually do a bang-up seemed to have missed the real news that Marc Benioff, CEO of Salesforce, announced this week at the TechCrunch Real-Time Crunchup: that Salesforce is going after the whole company, not just the sales people.

Robert - puhlease. I resent that. That’s way too simplistic a view. I called Scoble up on a time limited voice connection from the UK using a new SIM card that sucked my $$ faster than a Las Vegas slot machine. We didn’t get to complete the call so what I say here is based only in part on that conversation. As I said to Scoble: ‘Of course we got it. A year or more ago. And demo’d it in front of around 8,000 developers around the world. It is called ESME and is available as an open source project. I know a lot about that project as I was chief ‘handwaver’ and advocate both inside and outside the SAP community. So let’s be clear - in concept - Chatter is NOT new.

Here’s what ESME offers that Chatter doesn’t:

• It’s open source. You can play with it, figure if it works for you or discard at zero cost.
• It was built with scalability in mind. It’s based on the Scala/Lift framework. That’s what was used to help Twitter solve its problems a year or so ago when the Fail Whale was a common occurrence. Salesforce.com knows that if demand takes off, it has to solve the scaling issue very quickly. It reckons this will be done within a year. I’m suggesting that if they took on board the tenets of how ESME was built, they could do that inside 3-4 months.
• ESME was built with business process in mind. It was built to demonstrate problem resolution inside day to day business processes. Chatter doesn’t address that directly but indirectly. In conversations I had with Salesforce.com execs, they see it as a way to get customers to spend more on SFA or field service/call center apps that Salesforce sells. That’s a narrow view and not aligned with the broader view pundits are ascribing to the service.

In comments to Scoble’s post, Mike Krigsman punts the hush, hush, wink, wink idea that Salesforce.com already knows this could go deep into the enterprise. At one level he is absolutely correct. Yet SFdC handles a sliver of enterprise process capability:

The significance of Chatter is validating social computing in the enterprise, which you addressed in the comment from Jive’s CEO. Those who think Chatter is a trivial Twitter clone are short-sighted in their view. Based on off-the-record discussion with senior execs in a position to know, I can assure you that what we see today in Chatter is merely the tip of the iceberg. Social computing now has the strategic backing from one of the enterprise software heavyweights. That’s significant. By the way, if anyone doubts Salesforce’s commitment to Chatter, look no further than the the fact it is a new “force” platform module. That’s their bedrock platform.

[My emphasis added.]

Mike - this was validated a year ago. Admittedly it was early but it absolutely was validated by SAP and its immediate supporters at very large enterprises. Mike sat in on the same meetings I videod with Salesforce.com co-founder Parker Harris and (not videod) conversation with Brett Queener. Where is that over arching vision which he claims? Instead and including discussions with Steve Fisher who has to make this stuff work, I didn’t hear any of that hyperbole. Instead, I saw a measured acceptance that Salesforce has much to do before it can aspire to the predictions being made.

Herein lies the danger. Salesforce.com may well have its hands on something of real value. The fact it is giving it away for existing users tells me it sees long term value in the embedding to the Force.com platform. But…it has to monetize along the way. When you parse that against business process you then need to examine what SFdC actually owns. The platform + SFS + field service + call center. Good though that is, it is a fraction of what makes a business tick or that which delivers breakthrough value unless you believe that sales based functions are at the forefront of delivered business value. I question that at multiple levels. Couple that with the acknowledged fact SFdC is wrestling with managing and filtering the noise v value clutter in the real time stream (which ESME arguably solved early on albeit at a rudimentary but workable level) and you can see this represents a big set of technical problems. To its credit, Salesforce.com acknowledges those issues and knows it doesn’t have a good answer. Today. That I respect. What I don’t respect are pundits writing strategy for the company by proxy when they’re not seeing the technical impediments.

So - before all the handwavers go declaring victory think this: Salesforce.com is a credible and major SaaS vendor. It is NOT a credible enterprise process vendor. At least not yet. It doesn’t own all the process steps where something like Chatter will deliver value yet owns the platform that allows these services to emerge.

Back to SAP. It had the chance to take ESME and make its own almost from the get go. It was built with Netweaver integration in mind. It had/has to potential to reach millions of users - today. So here’s the real difference. Salesforce.com is brilliant at timing and packaging. For all the dopey naming of Chatter, Salesforce.com has the immediate mindshare that SAP could have owned a year or more ago. Does SAP get a second shot? Of course because ESME could be embedded in a matter of weeks/months while Salesforce.com tries to figure how it scales. SAP has millions of captive users where Salesforce has a fraction and more importantly, has only a tiny part of the total process view.

In the meantime - I invite readers to watch the video I recorded of Enterprise Advocates colleague Ray Wang speaking to SAP users earlier today in the UK. It puts much of this into perspective. (see top of post.)

Finally - and to repeat - I didn’t get to finish the conversation with Scoble. I trust this post will help flesh out where I am coming from on this important discussion.

November 20th, 2009

Conference energy levels

Posted by Dennis Howlett @ 6:00 am

Categories: Uncategorized

Tags: Salesforce.com Inc., Software-as-a-service, Event, Software As A Service (SaaS), Managed Hosting, Sales Force Management, Cloud Computing, Emerging Technologies, Sales, Dennis Howlett

Coming to Dreamforce has been a revelation. The news was dominated by Chatter but that only tells a fraction of the real story. As I sat in the media room chatting (sic) to an old buddy it occurred to me this was a conference that annoyed for all the right reasons. Try as I might, I couldn’t find a single disaffected customer. Out of an alleged 19,100 registered attendees, surely there must have been someone who was ticked off with Salesforce.com? If they were then I couldn’t find them. That’s got to be a good thing.

But I did come across one person who was less than impressed with Chatter: “Two and a half hours in and I’m thinking, all I want to do is pee,” says a lot for Salesforce.com CEO’s perception of what constitutes acceptable timing for a keynote.

Some of us might find CEO Marc Benioff’s insistence on running three hour keynotes tiresome and over done (as did my new found friend) but then as the poster child for fun led SaaS, it’s hard not to enjoy events of this sort. From his corny cracks at Sharepoint to an off the cuff remark he made to one of his EVPs with whom I was in a deep dive around scalability where Benioff said: “You don’t want to believe a word this guy says,” there is a playfulness behind Salesforce.com that keeps a lot of people smiling. Outside the event, I chatted with many customers whose impressions can be summed up in two words: ‘value achieved.’

The same goes for partners. I spent time with Jeremy Roche CEO of Financialforce.com. I’ve known Jeremy a number of years and in the above video he can barely disguise his excitement at what this event is delivering to his company. To say that visitors were queuing five deep at the company’s booth is not an exaggeration. On the first evening, security had to close them down 15 minutes after the official show close. Staff had to be shipped in to handle the demand and were working 14 hour days. That’s the sort of buzz I saw at this show. “No tumbleweed here,” is Jeremy’s opinion.

Contrast that with the relatively somber, under attended events of the incumbent on premise vendors where almost nothing of substance has been announced this year and where the buzz, if any, has been muted. That’s a natural breeding ground for disaffection and something you could sum up in two other words: ‘content free.’

My colleagues agree the energy levels at Dreamforce hark back to the early days of ERP and the heyday of Siebel where you had to beg to get in on events they were so much in demand and where something fresh and interesting was emerging almost every quarter. These days, the new stuff is happening daily. You have to be both a sprinter and marathon runner to keep up. That’s all to the good.

We shouldn’t get too excited though because regardless of Salesforce.com’s relative health combined with the fact it is still hiring people, the general market for IT is flat. But if I’ve learned anything this week it’s that there’s still a hunger for game changing innovation. When it’s visible, people get excited. When it’s hard to see, people start questioning the value of their IT investments.

The incumbents will argue that Salesforce.com is addressing a sliver of what matters to enterprise. We can debate that but in reality it is a symptom of an incumbent market that’s mature, fat and lazy. The new kids on the block know that for SaaS to survive, they have to maintain energy not just now at marquee events but well into the future. It is perhaps a sign of what this market is about that for SaaS vendors to succeed, they have to deliver day in day out. No shipping a CD, taking a fat check and walking away with an entitlement to 22% maintenance. That’s a very different value proposition.

Apart from all the happy faces, where is the evidence for the veracity of my claims? Run a Twitter search on #sapteched09 and #df09. I was running a Cover-it-Live session on #df09 and the quantity of people diving into the Twitterstream was extraordinary. Apart from the few hours of sleep people took after the close of the invitation only Appirio party at the end of the first day, the stream was relentless. As I am drafting this, the stream continues some three hours after the event closed. Compare that with TechEd where you’ll find the ‘usual suspects’ and some others. Nothing like the buzz at Dreamforce.

And one more thing. There wasn’t enough time to meet all the people who had put requests my way. It’s a while since that happened. That’s not so good. Maybe another time I’ll take an extra day to pack it all in.

Is it any wonder that buyer advocates are so enthusiastic about SaaS?

Disclosure: CODA, from which FinancialForce was spun out is a site sponsor and occasional client.

November 19th, 2009

Chatter: Amplified

Posted by Dennis Howlett @ 8:45 am

Categories: Uncategorized

Tags: Salesforce.com Inc., Sales Force Management, Sales, Dennis Howlett

Last evening, fellow ZDNet’ers Mike Krigsman, Dion Hinchcliffe, Tom Foremski, Brian Sommer along with fellow Enterprise Advocate Vinnie Mirchandani and I sat down with Parker Harris, co-founder Salesforce.com to get a deep dive into the rationale behind Chatter, what it’s really about and where it’s going.

In the above video (7 mins 5 secs), Parker talks about the problems of email and how Chatter can serve as a platform for collaboration, initially around the sales and service processes upon which Salesforce.com concentrates. As the conversation moved on, he also talked about how simply taking Twitter style feeds of itself is not enough and that that company needs to work on filtering and semantic analysis so that people are receiving the right data. This addresses the key issue of relevance around the infusion of social computing technologies into the more formalized structures of CRM (for example.) Salesforce.com is clearly in ‘thinking’ mode on this topic and will watch how customers use Chatter before making significant development investments.

It’s an enthralling conversation and one that provides excellent insights into how Salesforce.com is thinking about collaboration both in the short and longer term.

Disclosure: Salesforce.com met my travel and expenses to Dreamforce.

November 19th, 2009

How FinancialForce crushes it in SaaS accounting

Posted by Dennis Howlett @ 8:32 am

Categories: saas

Tags: Accounting, Software-as-a-service, Software As A Service (SaaS), Operational Accounting, Financial Services, Managed Hosting, Emerging Technologies, Finance, Dennis Howlett

Brian Sommer does an excellent job of explaining how the move to SaaS is working for the ‘new kidz on the block’ trying to displace incumbent ERP vendors. I’m interested in the accounting end of the market. It’s the one area where SAP, Oracle, Sage, Infor, Lawson and Microsoft have felt comparatively safe. The argument goes that no CXO is going to move their transaction data into the internet cloud and therefore they can continue to milk their customers for maintenance dollars at usurious rates for at least the next five/ten years. There’s a ring of truth in that.

The on-premise vendors have done a terrific job creating the kind of FUD that will keep many a CFO wary about perceived security issues. But then those same vendors forget that many if not all companies make at least some passing use of the internet and that individuals increasingly use services like online banking, share their data via PayPal and what not.

Where the SaaS vendor miss a trick is in asking buyers what is so sacred about back office accounting data. Surely sales opportunity data a la Salesforce.com is far more valuable yet now we see Salesforce.com hit the $1.3 billion revenue run rate, servicing 67,900 customers.

Yesterday I sat in on a FinancialForce.com early adopter panel. Let’s be clear - none of these companies have been through a full accounting cycle so we cannot be sure they’re going to be as happy in say a year’s time as they claim today. Nevertheless, what was unusual is that all the panelists on show are making accounting sound interesting. When was the last time you heard that?

Even more unusual is that fact that at least in one case (Quattro - see above video) the company on display makes SaaS sound as natural as taking an early morning shower. It’s just something you do. In this case, we’re talking about a startup where you’d expect the company to take an alternative view of the world but what about established businesses that are in the risk business? Here I was impressed by The Compliance Team Inc which talked about hard benefits - like 9% reduction in billing cycle times. Or Live Out Loud which talked about the ability to naturally reduce headcount from eliminating data matching and rekeying. These are not soft but measurable bottom line benefits you simply cannot get from an on-premise solution.

The most striking thing came in the Q&A. What about GAAP reporting? Not an issue. How about multi-currency? Got it. Projects? Yep…and on and on. One company has gone so far as to build their own payroll system using the Force.com. To use geek speak - that’s sick. Whoever did that in the past?

So what of the future? Economic vigor comes from the startups, visionaries and innovators. Where do you think they’re going to go a-looking for their accounting?

November 18th, 2009

Salesforce Chatter: what a clanger!

Posted by Dennis Howlett @ 3:50 pm

Categories: CRM

Tags: Salesforce.com Inc., Marc Benioff, Running Cover-it-Live, Saesforce.com, Sales Force Management, Sales, Dennis Howlett

Running Cover-it-Live has produced some interesting commentary about this morning’s announcement of Salesforce.com Chatter. Best summed up by Nenshad Bardoliwalla:

The length of this keynote has turned “Chatter” into “Splatter” IMHO

A three and a quarter hour keynote marathon, laced with the kind of hyperbole we’ve come to expect from the IT industry’s PT Barnum, Marc Benioff, CEO Salesforce.com had dulled even the most ardent Salesforce fan. By the time he got around to introducing Chatter, the once enthusiastic audience were mostly silent. Why the 10,000 faithful in the main room needed a near two hour re-run through SaaS history is beyond me, except to serve as an entree for Benioff to take a dig at Sharepoint. 19,000 registered attendees speaks volumes for how the SaaS industry is where the action is at. Compare that with comparatively meager audiences at similar SAP and Oracle events where getting 60-70% of last years’ attendance is considered a positive result.

So we finally got to Chatter, something Benioff introduced as a ‘breakthrough’ and ‘Facebook for the enterprise’ as though it is something new. It isn’t. Last year, a bunch of us demo’ed ESME at three SAP TechEd’s reaching some 12,000 developers. At the time it was an early stage service example designed to be Twitter for enterprise but tuned for the SAP Netweaver environment where content and context meets business process. Then there is Yammer, although that is more stand alone. What I saw this morning was little different on the surface to ESME but with one massive exception. Packaging.

Saesforce.com has done a phenomenal job in packaging up a service that puts context into the real time stream of unstructured data, concentrating on Twitter as a metaphor for its primary iteration. As such it looks slick, polished and delivered with impeccable timing. However, as Mike Krigsman asked during the Q&A, what will Salesforce.com do about the inevitable noise factor generated by Twitter and similar services. The company says it is working on refining that element but having seen something similar coming from Epicor in recent weeks put into a mobile scenario, the answer should already be self evident: filtering and group allocation.

Like others, I have concerns over the choice of product name. Sameer Patel gets it right when he says:

Chatter is as bad a term as Social. Execs will love that

…and made worse when Benioff brought to the stage ‘Chattty’ a variation on ‘SaaSy’ the ‘no software’ badge. This is where I suspect Salesforce.com will run up against a brick wall. The notion of contextualizing random unstructured data coming from the live stream is where I’ve long felt real collaborative value lays. Deflecting attention to the product name is inevitable. It will resurrect the old problems companies have of reconciling the prospect of wasted time on social networks with real work.

Salesforce.com may well be the poster child for hip and cool apps that bring the consumer experience to the enterprise but it will likely find CXO’s baulk at the idea of Chatter as a useful addition to their Salesforce.com environment. Only time will tell whether Salesforce.com marketers have judged this correctly.

UPDATE: the Twitterati have voted:

Furrier RT @dahowlett: RT @kitson @rwang0 RT @siddmishra ‘Collaboration cloud’ - much better! RT @rwang0: Why not Social Cloud instead of Chatter?

November 18th, 2009

Dreamforce 2009 - live

Posted by Dennis Howlett @ 9:17 am

Categories: Uncategorized

Tags: Dennis Howlett

November 15th, 2009

Oracle consulting layoffs: but what's the number?

Posted by Dennis Howlett @ 8:07 pm

Categories: ERP, Enterprise applications, implementation, outsourcing

Tags: Layoff, Oracle Corp., TrailMaster, Workforce Management, Human Resources, Dennis Howlett

Speculation took off over the weekend that Oracle is/has laid off sizeable numbers from its consulting organization. At least one source claims 20%, others 7-10% and yet another says 3,000. The difference between the various reports suggests no-one really knows except the tight lipped HR management and the board. Whichever the number, it sounds like the cuts will run deep.

Fellow Enterprise Advocate Frank Scavo noticed something odd was happening when his site started getting pinged on the topic. How? The graphic to the left which comes from his Sitemeter, records shows the ping action:

A quick check of my webstats shows a pickup in web referrals today searching under the key words “Oracle layoffs,” “Oracle Consulting layoff,” and “Oracle layoffs, Nov 2009.” (see image on right).

In the past, this type of activity has been a reliable indicator of Oracle’s workforce reduction actions.

Frank has been following the ERP layoff story for well over a year. In October 2008 he said:

Oracle’s layoffs are baffling. Senior consultants with Oracle experience are reportedly in short supply. If Oracle’s sales are as robust as Oracle says they are, they should be hiring such people, not firing them. Perhaps this is an early warning that Oracle sees softness in its new sales pipeline, and without cutting headcount it knows that consultant utilization will fall. In professional services, utilization is the key to profitability.

The current round of layoffs are equally baffling at one level yet eminently understandable. On the LayoffBlog, a person named ‘NAC’ comments:

OCS needs to rationalize their Billing Rates to survive in this competitive market. Gone are those days when you could charge the Customer @ $250/Hr. Customers these days have become really smart and they can get good quality experienced Resources at a much cheaper cost. Instead of laying off the Delivery Consultants, OCS Senior Management should aim at cutting down the Administrative Overheads such as the Resource Analysts and Admin Assistants who generate No Revenue at all.

Another one bites the dust says:

The long awaited hammer finally dropped on me today. Got my “bonus”, time to look for independent work. The funny thing is, OC price itself out of the market with a single minded goal of “margin”. There is plenty of work out there. Plenty of them I have seen from the PJR that went unfilled because of botched negotiation. time to grab those.

TrailMaster adds:

Today is my last day. 11 years with PeopleSoft Oracle and I was on a billable project till April. Go figure!

These comments have a ring of truth about them. I have seen this before in Europe, accompanied by staunch denials or handing off to middle management who couldn’t possibly answer the tough questions. It is standard Oracle procedure. Here’s how it goes:

• It’s coming up to quarter end, the numbers are probably going to look bad, let’s give Wall Street something to cheer about.
• Oracle can’t lie about the numbers but will avoid bumping up against the WARN Act if it can. I suspect the latter’s what’s been calculated here.
• Since projects are ongoing and people within those projects are also being RIF’d then I also suspect that at least some of those same consultants will be re-hired as contractors. I saw that in Europe on a number of occasions. There’s no reason to doubt it will not happen in the US, especially if the numbers being RIF’d are high and possibly indiscriminately. The short term effect is that Oracle can legitimately call headcount numbers as lower which will please the financial analysts but will mask what’s really going on.
• Customers lose out. Pulling consultants off projects mid-way through is disruptive for all the wrong reasons. If Oracle projects are billed on time and materials, then there’s always the chance that Oracle can get away for a few weeks at least by having people on the job billed out in the usual manner even if they’re really coming up to speed and not being productive. Alternatively, Oracle can offshore the work in the hope that any project delays can be compensated by short term over staffing in cheaper locales while maintaining the outbound contracted billing rate. Customers lose out either through delays for which they pay or substandard work requiring later re-work. Oracle doesn’t need to factor in the additional margin immediately as it can provide against the cost leverage it is able to get from sending work to cheaper locations against possible rework. Whichever method of accounting it adopts, it can afford to be cautious and still come up smiling

POV: Once again (but like others in the ERP market) Oracle is squeezing the P&L account. Oracle’s masters are the Wall Street analysts. Oracle knows it and plays the game masterfully. It is one reason analysts consistently think Oracle is a winner while SAP is a loser. They are mostly wrong despite Oracle having a brilliant acquisition strategy and execution team.

You can’t keep chasing margin at the expense of the two most important communities (customers and implementation consultants) and expect the business will go on producing stellar results forever and a day. It’s neither logical nor possible without something blowing up along the way.

While this layoff may be significant, it is too early to tell how customers will be impacted. My guess is there will be short term disruption that Oracle will paper over by parachuting Oracle Aces in where needed.

From comments I’ve read and people who’ve spoken with me about Oracle in the past, it seems this is a company that has layers of fat that could be usefully excised. More than one of the commenters to LayoffBlog has said as much. In the past, acquired Peoplesoft staff have told me Oracle represents a relatively comfortable and well paid meal ticket. The fact we are seeing a repeat of the past suggests Oracle is not managing the intermediary layers as well as it could.

More broadly, the combination of the recession, better value offerings from SaaS vendors and an increasingly well informed buyer community able to negotiate better terms is biting hard into the big ERP vendor pocket books. Blended rates are plummeting yet Oracle needs to maintain its margins. More productivity is one answer. Deflecting attention to headcount is another.

Oracle’s RIF is just the latest manifestation of an industry that has yet to come to terms with a new reality. For what it’s worth, I am hearing repeated rumors of a potential re-organization at SAP planned for January 2010 with another sizable chunk of people due to be RIF’d. There will be many more stories of this kind in the coming months before the recessionary tide turns.

PS - I have sent a request for details on the RIF to Oracle. It’s a weekend so I don’t expect a response in the next few hours and I am preparing for a long travel day so may not see a response the moment it lands into the inbox. Therefore much of what is being said can only be regarded as reasonably well informed rumor. I will update this post as soon as I see a response or other facts emerge.

UPDATE: Oracle’s response is: ‘no comment.’

November 14th, 2009

Another chapter starts to unfold in the SAP maintenance story

Posted by Dennis Howlett @ 7:50 am

Categories: ERP, Enterprise applications

Tags: Customer, SAP AG, Helmuth Guembel, Free Trade, Finance, Dennis Howlett

Claiming an exclusive, wiwo.de today says it is receiving reports that SAP is looking for price increases from those customers who are not on Enterprise Support by reference to the never before used cost of living index clause that is tied to inflation in the German wages index. This is not a new story. Helmuth Guembel has raked this over a couple of times, most recently noting that:

Maintenance will increase to 20.7% for all agreements dated 2000 and earlier. Agreements closed in 2008 will carry an increase of  .315%.

Customers can cancel their maintenance agreement by December 31st within 2 weeks after receiving the “love letter.” Customers who receive service through SAP partners can cancel within 4 weeks after ther partner has received said letter.

The wiwo.de article broadly retreads Helmuth’s position but adds more color about the number of companies likely to be affected and, more importantly, naming more companies coming out the woodwork on contract negotiations.

According to the article, some 400 companies are likely to feel what amounts to an arm twisting increase up to 20.8% instead of the Enterprise Support figure for 2010 of 18.4%. Andreas Oczko, deputy chairmen of the German SAP user group (DSAG) regards the move as “unfair” and described members as “annoyed.”

Earlier in the week I was fielding emails from Wall Street analysts looking to tweak their SAP year end closing models. One was insistent that on the basis of their calculations, SAP has to push the proposed price increase through. That may well be in SAP’s best interests. But increasingly I and colleagues are finding that customers remain far from convinced they will see value from the KPIs agreed between SAP and SUGEN. These represent the way customers assess value delivered and against which SAP expects to see maintenance price increases.

If SAP is successful in this latest move, it would accelerate some maintenance revenue. On the other hand, wiwo.de believes that overall maintenance and support revenues will fall by 4% or around €200 million ($298 million.)  Given that the German based Raad Research believes only 24% of customers have signed up for Enterprise Support, that €200 million number might well be in the right ball park. At 90-95% margin, it’s a big number to drop out of the profit and loss account, implying SAP will have to run another slide rule over its headcount in early 2010.

Earlier we heard that Siemens had canned and then re-negotiated its maintenance contract with SAP at a much lower price. Now wiwo.de is naming other marquee customers: Nestlé, Daimler and Tchibo as in negotiations on this line item. None of these companies provided public comment. Crucially, none were denying the veracity of wiwo.de’s claims. Siemens set the benchmark, others will surely follow.

It strikes me that despite all the behind the scenes negotiations, SAP cannot seem to understand that customers are not in a position to readily accept either the cash cost drain nor the value proposition that SAP espouses. It’s a double whammy.

Like so many things one sees at SAP these days, this is a company that is struggling to issue public statements that makes sense either to jittery investors or unhappy customers. There are plenty of people inside SAP who question what’s going on, not just here but in other parts of the business. But then there is that 1990’s arrogance when SAP could charge $10K and up just to have them turn up and put on a PowerPoint demo. At times it seems that SAP is the only one who doesn’t ‘get it’ on certain issues. In the long run, that continued blindness to market reality (as opposed to Wall Street wishful thinking) will hurt the company much more than it may realize. In my mind it is playing with fire and that despite its massive brand attractiveness.

Third party providers like Rimini Street on maintenance, Cognizant on BPO, under the radar Indian providers doing both and others will offer a lower cost haven for those distressed customers unwilling to pay SAP’s maintenance tax. As things stand today, the 3PM companies have almost no downside unless SAP does yet another about face.

In the meantime, Helmuth is doubling down on the Sapience conference he ran in Europe earlier in the year. This time in Cambridge MA overlapping SAP’s annual Influencer Summit just down the road in Boston. Coincidence? Go figure. Enterprise Advocates Vinnie Mirchandani and Ray Wang are slated to appear as are former SAP execs Paul Wahl and Matthias Meuller-Wolf. Other industry heavyweights like Craig Conway (ex-CEO PeopleSoft), and Jan Baan (ex-CEO Baan Corp) contribute to an impressive line-up. It will be interesting to see which event generates more ‘ink’ and how reports vary. I’m already sharpening my digital pencil.

November 11th, 2009

Epicor's implementation cost drive: what does it really mean?

Posted by Dennis Howlett @ 6:30 am

Categories: Uncategorized

Tags: Epicor Software Corp., Customer, Benefits, Roi/Tco, Outsourcing, Human Resources, Finance, Managerial Accounting, It Operations, Business Operations

Epicor’s announcement Monday that it has created a shared benefits program for implementations looks like a step in the right direction for those of us that want to see lowered implementation costs. On the face of it, the offer is compelling. According to the press release: “Upon project completion, if the project is under budget, the savings are shared 50/50. Conversely, if the project runs over budget, the customer is billed 50% of the contracted professional services hourly rates for all over-budget costs.”

Fellow Enterprise Advocate Vinnie Mirchandani, was quoted in the New York Times as saying:

“[With] many large companies I help negotiate implement contracts for, we try and include a bonus/penalty piece based on budget, time, customer satisfaction and business results,” Mirchandani said via e-mail. “So not unusual, but good to see a vendor proactively offer it.”

Ray Wang - another EA - was quoted in the original press release making the more general comment: “Software vendors have this opportunity to take their position of strength and demonstrate how they can provide customers value during a down turn. In doing so, they will help their customers succeed and earn customer loyalty and good will when the economy picks up.”

However, Frank Scavo yet another EA contacted me expressing concern that as it stands, the offer may lead to unintended consequences. He blogged that the announcement only addresses the cost side of the over all equation citing three potential problem areas:

1. Project manager’s lack of motivation to expend implementation dollars
2. Choice of consultants where a project is stressed
3. Focus on installation rather than benefits

Let’s step back a moment. During his Monday keynote, George Klaus, Epicor’s CEO was at pains to point out that customer service is a very big deal to the company: “We have to keep those upgrade customers because as you know it is far more expensive and difficult to acquire new.” In her keynote, Lauri Klaus, EVP worldwide consulting continued the theme (see pic above.) However, the move to Epicor 9, the only product the company is selling these days, is often non-trivial.

I spoke with the customer services teams who, this week, have been putting out a strong upgrade message. I was impressed with the depth of tools, techniques and services that surround the Epicor 9 methodology. But let’s be clear. It is a significant upgrade for those customers who or on anything other than Vantage 8. Dan Sirow, director at early adopter ICC told me: “It was easy for us as we were on Vantage 8. However, getting to Vantage 8 was a big challenge. We made the mistake - as many manufacturers do - of pretty much ignoring financials in earlier implementations. It was a major task to fix the problems. But once done, Epicor 9 was easy.”

Given the complexity of Epicor 9 and the myriad customer variations of current implementation, it is easy to see how customers might significantly under scope their projects. Indeed at one level I can easily argue that for many Epicor customers, version 9 is a step too far. At least for now. That’s not a criticism but a simple statement of fact about a product that is complex, demanding but could provide significant long term benefits. In order to better understand the situation, I spent time with Craig Stephens, VP Epicor consulting services. I asked him to walk me through the offering, addressing Frank’s points.

“We want customers to understand they have a critical contribution to make in projects. It’s a team effort where the customer’s effectiveness impacts us. Shared benefit (aka risk/reward) allows us to draw attention to this,” he said. Addressing Frank’s specific remarks, Craig said: “I would have thought that a fixed price  doubly incentivizes consultants to be in and out. That’s why although the impact is broadly the same, we advise customers we’ll agree a project budget.” I then asked about change orders: “We can deal with those a number of ways - perhaps decide to park on the side or incorporate into the same shared benefit arrangement, depending on scale and likely impact.”

On the matter of consulting quality, he had this to say: “We’re at the early stages of rolling this out and there is still work to be done with consultants to get them fully on board. It doesn’t make sense for us to put anything but the best consultants on a project that’s becoming stressed, otherwise we lose out and the customer will be unsatisfied. During the preparatory stages, we are a lot more structured to take advantage of what we believe are best practices for industry verticals. They’re not perfect but they’re a formalized way for us to provide certainty. We also talk early on about ROI and KPI goals. We’ve been piloting a more proscriptive method in the UK. That’s allowed us to shorten the amount of effort on the customer side though we still have about the same amount of effort on our side. We’re certain we can bring projects in at reduced TCO and improved ROI, the latter because the overall investment is lower.”

The devil as always is in the detail. On the basis of what I’ve seen in the standard implementation contract (but which I have agreed not to share publicly) I am satisfied Epicor’s public statements about the scheme are fairly reflected in what customers are being asked to commit towards.

This will not be the end of the story. As the customer war stories emerge, we’ll know whether Epicor’s aims and intentions are met in the real world.

Disclosure: Epicor settled my travel and expenses to the conference.

November 11th, 2009

SAP and open source: it's about Oracle

Posted by Dennis Howlett @ 2:35 am

Categories: Uncategorized

Tags: Oracle Corp., SAP AG, Matt Asay, Open Source, Dennis Howlett

Matt Asay has written a piece about SAP’s ’sudden’ love affair with open source:

What is surprising is that it is SAP, the bastion of proprietary software, that delivers this message.

Irony, thy name is SAP.

SAP, after all, is hardly the most open-source or open-process friendly company on the planet. Despite early involvement in Eclipse, some interaction with MySQL (MaxDB), and a new commitment to the Apache Software Foundation, SAP remains a firmly proprietary company.

Dude - IT’S ABOUT ORACLE. The big clue comes in the quote in Matt’s piece from Vishal Sikka, SAP’s CTO where he says:

To ensure the continued role of Java in driving economic growth, we believe it is essential to transition the stewardship of the language and platform into an authentically open body that is not dominated by an individual corporation.

Matt added the emphasis but didn’t spot it. Truth is SAP is scared witless about Oracle’s intentions regarding Java once they (presumably) acquire Sun. As I understand it, the way the T’s and C’s are written for Java in commercial environments, Oracle has or could have a right to charge for the SDK, an essential piece of the Java puzzle for big vendors like SAP. Oracle already benefits to the tune of some $1 billion a year from SAP being an effective Oracle DB reseller. Adding in the pain of $??? for access to the SDK would stick in SAP’s craw.

I can imagine Oracle would be delighted to invoke a charging clause. Especially if it meant sucking more blood from its arch rival. Heck - it beats filing law suits.

More seriously, if Oracle could and did levy a charge, SAP would have no real way to pass it on to customers. It’s open source innit so in the minds of buyers anything SAP has to deal with becomes a cost of IT doing business.

SAP could argue cost increase ergo pass it on but then that runs counter to Sikka’s charm offensive and risks SAP truly living up to the ‘pot, kettle, black’ monker Matt applied to the article. But there is another side to this.

SAP has been trying to get the influential SAP Mentor group onside with open source. That’s probably one of the easiest tasks it has. Geeks love open source and care little for commercial issues. And the Mentors are extremely good geek advocates for what SAP does. Marketing wise it’s an internal SAP community slam dunk for SAP. But…SAP has also made clear that IT doesn’t believe open source means ‘free.’ Mentors may not be concerned about that from a development viewpoint but I’m pretty darned sure they’d get antsy if the license bills came at deployment time.

As an aside, I have practical experience of running the SAP IP gauntlet. If SAP is truly committed to open source then this will relieve a lot of the pressure on developer groups. However, that’s not a certainty.

I note that Matt is presenting to SAP later today. I hope he has time to read this. It might give him something to consider?