This summer while researching for SAP Nation 3.0, I have also been reading plenty about the young nation of the US in the 1800s. The comparisons to the enterprise vendor market, two centuries later, in the 2000s are striking.
In 2000, enterprise vendors had many reasons to feel good about themselves. The Y2K challenge had been met – customers could breathe easier. ERP software had allowed enterprises to replace hundreds of fragmented, departmental solutions. New customer facing, supply chain, industry specific opportunities beckoned. A growing proportion of corporate IT spend was with outside vendors – “buy” had trumped “build”.
As you looked at who would dominate the coming century you could say IBM, Microsoft, Oracle, SAP, infrastructure vendors like HP and Verizon. At Gartner we even thought SIs like Accenture would become enterprise integrators and move to the top of the food chain.
The US, then the original thirteen colonies, in 1800 was a young, skinny country. 2/3rd of the population lived within 50 miles of the Atlantic Ocean. Under British rule, the Royal Proclamation of 1763 had declared the boundaries of the colonies as the Appalachian Mountains. Any travel or settlement beyond the mountains was illegal. Even after independence the country had not grown much. The Mississippi river was the western border. You could have put bets on the Americans, but also British, the French, the Spanish, even the Russians on who would take over North America. Each had a foothold across parts of the continent. May be even the Dutch or the Portuguese who were colonizing parts of the Caribbean and S. America.
In his inaugural address in 1801, President Thomas Jefferson talked about a nation “with room enough for our descendants to the hundredth and thousandth generation.” Jefferson was off by a wild margin. Within five generations, by the end of that century, the country had citizens from “sea to shining sea”. The Americans had won out handily – it was actually done by the middle of the century, though the Civil War which followed could have changed that trajectory.
It had taken Jefferson’s Louisiana Purchase from the French in 1803. It had taken similar vision from later Presidents to keep adding to the country’s real estate. Andrew Jackson tried to buy Texas from Mexico in 1829. He was rebuffed but after many twists and turns, President James K. Polk annexed Texas in 1845. After the Mexican-American War in 1848, he signed the Treaty of Guadalupe-Hidalgo in 1848 and picked up California. He also negotiated the Oregon Treaty with Great Britain in 1846. In 1867, Secretary of State William H. Seward negotiated the purchase of Alaska from Russia.
None of these expansions were easy to finance nor were they always popular. Jefferson was questioned if he had constitutional authority to sign the treaty with Napoleon. With the country struggling with debts from the Civil War, Alaska was called “Seward’s Folly”. While the leadership arranged for the real estate, it took grit and plenty of sacrifice for the population to move west. It was a trickle when Meriwether Lewis and William Clark did the epic Corps of Discovery trek to the Pacific in 1804. Their maps and commentary on various Indian tribes along the way opened up wave after wave of others who followed west on the Oregon Trail many as mountain men and missionaries, the Mormon migration to Utah and the California Gold Rush of 1849. The floodgates opened up with the completion of the transcontinental railroad in 1869.
Yet, there was a continual westward pull with feeling of “It’s written down somewhere – it’s got to be”. If people could not see it in the stars, hear it in political speeches, imagine it in their holy books, they did find it in what John L O’Sullivan wrote in the July–August 1845 issue of the Democratic Review “It is our manifest destiny to overspread the continent allotted by Providence for the free development of our yearly multiplying millions.”
In contrast, as we approach the end of the second decade of this century, we see no clear winners when it comes to enterprise tech vendors. If anything the market has become more fragmented since the start of the century. A new set of cloud software companies emerged and became stronger – Salesforce, Workday, NetSuite. Yet, in two decades, cloud applications have barely scratched 20% of the addressable market across geographies and verticals. Lots of white space to be captured. Cloud infrastructure has taken off. Amazon and Microsoft have penetrated markets that were IBM and Oracle and HP’s to lose.
IT integrators like Deloitte were challenged by Indian and other global delivery services firms. 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. 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.
Consumers used to get dregs – decades after governments and corporations got technology innovation. Now, we talk about the Sunday night, Monday morning disparity. What consumers have at home and car is better than what they get in their office, in their planes, in the hotels they stay at. Who was responsible? Players like Apple, Samsung and Google. Consumers have become increasingly digital and social. Who has largely benefitted from this? In sheer dollars, it is Google and Facebook. Enterprise tech ignored consumer markets, even now only glibly talk about B2B2C – business to business to consumer.
There have been several trillion dollar markets since the start of the century. But in each case enterprise technology players 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.
The good news – nobody has yet become dominant. Nobody has shown the vision of Jefferson and Seward to acquire massive chunks of real estate
For various reasons I will discuss in the book I am betting on SAP to be near the top in leading the pack. Unlike an IBM or an Oracle, it still has at core an application and business process DNA. It has some of the most sophisticated customers across the world. It has blunted the threat from cloud vendors with its own acquisitions. Having said that it has also shown a tendency to make unforced errors. It has chased often after platform markets when it should stay application centric. It has disappointed its customers with Indirect Access and other ill advised licensing moves. Its partners continue to do poorly and cost its customers way too much cost and effort.
The century is still young. Other enterprise vendors can still rally their troops with a Manifest Destiny call. From sea to shining sea still awaits.
(Cross-posted @ Deal Architect)