Over the last few months I have been doing my research for SAP Nation 3.0 while going to countless industry events, and consulting with several clients. I sense the enterprise software and services market is at a pivot. More about that in a minute.
I have also been reading about and watching a lot of US history in the 1800s. The US went from the Western border being the Mississippi river to what it is today. It took negotiations for the Louisiana Purchase with the French, the Oregon treaty with the British, the Mexican Cession of California and other western lands, the Alaska Purchase from Russia. It took incredibly brave pioneers to tame the wild West – the miners who flocked to California, the Mormons who settled in Utah and many others. “Manifest Destiny” was the frequent rallying cry and many a glaring mistake was made in that zeal, but the country gradually moved its Western borders to the Pacific Ocean.
In 2000, the enterprise software and services vendors were kings of the world. In the previous decade, as customers rushed to solve their Y2K issues they bought packaged software by the truckload. Each year at Gartner I saw that in thousands of calls with clients. I also saw these customers became dependent on systems integrators and outsourcers to implement, host, manage, upgrade the software.
In this boom, these vendors forgot to look around them or broaden their horizons.
In the meantime, products became smarter with sensors and satellites and software. Who largely benefitted from this? Contract manufacturers like Foxconn, Flex and Jabil. Foxconn itself employs many times the staff large IT services firms do. Consumers have become increasingly digital and social. Who has largely benefitted from this? In sheer dollars, it is Google and Facebook. Cloud computing has taken off. Amazon and Microsoft have taken over infrastructure markets that were IBM and Oracle and HP’s to lose. Mobile computing took off. Who benefitted? Players like Apple, Samsung and Google. Industrie 4.0 and IOT took off to the benefit of large asset makers like GE and Siemens. Enterprise vendors have done little to verticalize. CIOs are doing their own modernization with micro-services. These vendors claim to be process experts – talk of “best practices”. Guess what, the next wave of process automation is being led by customers who are trying out drones and robots and RPA with specialist solutions – read Silicon Collar to see how little a role these vendors have played.
These are not small markets. And in each case enterprise software and services have played cautiously, not invested enough in CAPEX and R&D. They keep gloating about their quarterly performance, customer “stickiness”, how much “digital transformation” they are enabling. They are self-delusional. The new breed of vendors has out maneuvered them over and over in the last two decades and grown much bigger than them.
Unfortunately, that is the peer group SAP continues to measure itself against. It fights for Magic Quadrant spots against Oracle, Salesforce and Workday. It continues to rely heavily on IBM, Accenture, Deloitte and others for counsel and guidance often at massive cost to its customers.
It will continue to do ok with that approach. But I hope SAP starts to dream bigger. It has a new cadre of executives, many from its acquisitions, that are ambitious and driven. It has a customer base which has largely stayed loyal in spite of a number of unforced errors SAP has made.
I saw big thinking when I used to go to Walldorf in the late 90s. I look forward to that grand thinking again. SAP needs a Manifest Destiny call. It needs to look beyond the Mississippi. It needs to aim for the Pacific. That is the message I am taking to SapphireNow next week.
(Cross-posted @ Deal Architect)