Tuesday at Sapphire 2011, Jim Snabe and Bill McDermott, co-CEOs of SAP, spoke on the needs of modern businesses and the kinds of solutions that will be propelling these firms. The focus of their discussions (and the theme of the conference) was on the very near-term time frame of 2015.
In prepping for this conference and others this spring, I’ve noticed a thematic trinity appearing in an all too common question: “What will ERP vendors do after social media, cloud computing and mobility?” Monday, outside pundits on an SAP keynote panel had a slight variant of the question. Their three part trinity included: social media, mobility and in-core/memory-resident database technology.
How ERP vendors see the future, not just of technology but of business, should be a top of mind question for all software users (not just current buyers). The future direction of these products and vendors is really telling as to how they see their firms positively impacting your firm. Will they get it? Will they be fast in re-tooling existing product lines or building new product lines? Have they lost their innovation edge and intellectual courage/curiosity?
Sadly, many vendors aren’t getting it. The ones who don’t are fighting the move to cloud computing. They’re dismissive of new ways of reducing upgrade costs (and may be planning to raise maintenance costs without doing anything to reduce your internal maintenance costs and headaches). They may have run off their founders and their best and brightest innovators just to save money or make room for some private equity or Wall Street financial jock to run the company. They might say they care about your firm but they really just care about your continued fealty to their money-grabbing indifference.
The ERP market is bifurcating. There will be those vendors that see BIG, BIG, BIG change coming to businesses and are getting their heads around it as these changes will doubtlessly render, over time, most of the ERP solutions on the market obsolete. The vendors that continue with blinders on will perish (or die an even uglier death trying to play catch up). It’s time, folks, to start that dead pool for ERP vendors.
The big changes that businesses are facing are centered around: extraordinarily rapid, curvilinear innovation and changes impacting regulation, competition, finance, etc. The speed of business is not just increasing; it is growing at a skyrocketing pace while the ability of ERP solutions to change is approaching an asymptotic path. The gap between the speed of business and the speed of ERP is expanding not contracting at many firms.
So back to SAP:
I suspect that SAP chose their trinity partly because they have in-core/memory resident database technology (some of which is from the Business Objects acquisition a few years ago) and a Sybase acquisition (which brought a lot of mobility expertise to SAP).
In-memory computing has a lot of potential for businesses. Billions of records can be parsed, sorted, totaled, etc. now in mere seconds where old relational databases would take hours or days to do likewise. These technologies will be great for plowing through point of sale transaction data, weather data and lots of other data that companies don’t even keep today.Â Imagine what you’d have if you could:
- put sensors on (and collect data from) every piece of equipment in your manufacturing plant;
- put RFID sensors on every product/item you produce (not just the big or expensive ones);
- GPS enable every person and asset of your firm
- dynamically adjust store staffing in real-time based on current weather conditions at each location you have;
I get the power of this technology. BUT, in-core/memory resident technology gets really valuable when ERP solutions put something in these databases beyond accounting transactions. Blasting through journal entries in record time is not the way of the future. It’s not what businesses need or want. We need ERP vendors to quit seeing the general ledger as the center of the universe. Some software CEOs think like the Catholic Church did before and during the times of Galileo and Copernicus. They thought the earth was the center of the universe. Change for the church was tough. It will be tough for software companies, too, when they see that journal entries aren’t the be-all, end-all for running a modern business.
Mobile technologies are becoming the de facto systems entry point for millions of ERP users. Desktops are in decline and more and more workers are bringing their own communication devices to work. The modern worker is mobile, often works from home, may be a contractor (not an employee) and may never have a cubicle with a desktop computer. They don’t want their parent’s work environment or work systems. They work on their terms with their technology. If you’re an ERP vendor and you don’t design first for the portable workforce and the devices they use (e.g., cell phones and tablets) (and subsequently for desktop devices), then you’re behind the curve. More interestingly, ERP vendors are competing with small software companies (think 1-2 people) that are developing apps directly for these cell and tablet users. These developers don’t force their users to purchase a million dollar database and spend millions more with an integrator to connect their apps to an old ERP solution. The big question for ERP firms is “Can you develop mobile apps at the same pace and price points of the people creating apps for iPhones, Androids, etc.?”
Cloud computing brings new benefits to modern businesses. It can offer flexibility in an ever volatile business world. Multi-tenant applications bring opportunities to dramatically cut TCO (total cost of ownership).
Social media is part of the worker landscape today. It helps workers interact with job prospects, industry colleagues, suppliers, customers and other constituents. The challenge for ERP vendors is to see these networks (e.g., LinkedIn, Facebook, etc.) as one of the other planets that orbit the new center of the universe. ERP vendors can’t look at these social networks as mere connection points to their accounting transaction data. If they do, they miss the whole point and value opportunity.
SAP did a good job today of identifying their trinity. They laid out the change phenomena (via keynotes) and their co-CEOs spoke to how in-core (HANA), mobile and social innovations will be part of their vision for 2015. It’s clear that co-CEO Jim Snabe not only gets the changes impacting businesses, he knows how several of their technologies will address many of these changes.
What they didn’t discuss is maybe even more important. I listened and listened and never once heard anyone even suggest a re-write of the Business Suite applications (their core product line). Without that, the innovations seem to be peripheral extensions to the existing solutions. It’s innovation at the margins and isn’t transformative. This could be a big missed opportunity for SAP as they don’t want to mess with their legacy: accounting and business transaction processing. Businesses and business executives respond to business events (not journal entries). They jump when interest rates rise. They launch new sales promotions when a competitor abandons a market. They re-work their supply chain when a key supplier goes on strike. EXTERNAL EVENTS are the real work drivers and strategic levers of work. Sure, an accounting event will eventually result from some of these external events but these accounting events could be days or weeks away. You can’t run a real time business in real time if your software wasn’t designed for the totality of EXTERNAL events that businesses actually respond to. If a software company is serious about the future of business, it must get serious about these external events.
SAP does have sense/response technology to handle some external events and this could be a significant contributor to their ability to solve future business customer needs. But, that technology was not showcased much (or I just missed it) at this event.
Workday’s ERP solution is a different animal. It is an all-new product line that was designed for Event-Driven businesses. Yes, they also support the accounting events, too. But, it’s the heart of their design that makes their trinity (cloud, mobile, social) story more compelling because they have the ability to do so much more. Workday is also all cloud – multi-tenant cloud. It also is an early adopter of in-core/memory resident databases and it is building apps first for handhelds and later for desktops.
These two firms make for an interesting comparison. SAP has install base and breadth of product lines going for them. Workday has the underlying event architecture that only a couple of forward looking ERP vendors have.Â Both have similar, albeit slightly different, visions for the future of business and both should be applauded for trying to advance the thinking of where businesses are going (and how ERP remains relevant to them).
Software buyers have some tough choices before them now. First, they need to sift through the hype and misinformation to see who really is truly focused on re-inventing ERP (or just taking maintenance monies). Then, they need to assess the quality of the visions each vendor possesses (i.e., Who really understands the future of business and how will they deliver it?). A vendor whose leaders are passionless and visionless is a really bad bet. Finally, today’s software buyers need to assess whether any of the finalist vendors can actually deliver the re-invented or re-imagined solutions that businesses really need.
Disclosure: SAP covered my travel costs to Sapphire. I have been developing a book manuscript on the re-imagined business concept. I also developed a white paper on the subject andÂ Workday, a former client, recently posted this on one of their websites.
(Cross-posted @ Software & Services Safari Blog RSS | ZDNet)