Category Archives: IT

SAP needs to re-think its SME strategy

There’s little to no more buzz generated in today’s web-sphere by SAP’s Business ByDesign.  Let’s travel back a few years back (2007 to be exact) when former SAP CEO Henning Kagermann made the “most important announcement I’ve made in my career.” by announcing SAP Business ByDesign. SAP had set some huge promise for its killer solution to entering the Small-to-Medium Enterprise. More importantly let’s look at the important metrics that came with the annoucement:

“SAP hopes to add 10,000 Business ByDesign customers a year by 2010″

“SAP said that it has spent $500 million over four years with 1000 developers hammering away at the new suite.”

From Leo Apotheker’s interview with eWeek:

“Salesforce has a CRM application. It happens to be that the vast majority of businesses on this planet do a little more than just CRM. Our attempt is to get rid of all these acronyms. Businesses dont really buy acronyms, they buy a processes flow, a business model.”

This was an extremely bold set of statements for a company that has little to no experience in the small to medium sized business run. First, CRM is the absolute LIFEBLOOD of a SME. How do I know? I used to run one and work for one now. Also most SME’s can find open source solutions or easy to use SaaS’s to satisfy their specific needs (like Supply Chain, Project Management, etc). SAP itself is ridden with a plethora of ridiculous acronyms. (i.e. XI, PI, BW, BI, CRM, SRM, SCM, ERP, ECC, R/3, etc…) The absolute kicker of the the whole interview is that he states “Businesses buy a business model”. This is absolutely untrue.  SME’s don’t buy business models, they create them, and in most cases its the reason the SME’s exist in the first place – they redefine existing business models.

So where is Business ByDesign? As of September 2010, it’s at about 80. I’ve always said that SAP should have bought back when it was “cheap”. built the product and their company (for that matter) in a much more agile fashion. Even after 11 years, still only has 150 developers, compared to the 1000 developers SAP threw at Business ByDesign. At the time was trading at $35 and is now at $115 with a $15B market cap (compared to SAP’s current $62B). market cap represents nearly a quarter of SAP’s market cap today without being anywhere near profitable on Business ByDesign. Hindsight is 20/20.

I’ll end with this blog post from Infor that I think demonstrates SAP’s need to re-think its strategy: The same business processes that make enterprise companies like SAP so strong are the same ones that hinder them from enter into new and unknown markets.

Disruptive Technologies Will Save SAP

SAP’s ecosystem is in itself an absolutely massive market. Therefore SAP relies heavily on it’s partners to provide consulting services, conduct sales, and manage large scale implementations. There are three largely disruptive forces to this ecosystem and interestingly they all can be seen in SAP Business Intelligence:

  1. In Memory Technology
  2. Cloud Computing
  3. Mobile Applications

In Memory Technology – There is a huge market for OLAP and data-warehousing . The BI market is a multi-billion dollar industry. The in-memory technology (BWA and HANA initially) is largely disruptive to the way we store and report on data. SAP’s CTO Vishal Sikka commented on this by saying:

Together with our partners and customers, SAP is breaking down the boundaries between real-time events and real-time business decisions

SAP has made a strategic goal to eventually replace all reporting in the enterprise by use of the HANA (High-Performance Analytical Appliance). Many of my blog posts will centered around the evolution of this.

Cloud Computing – The buzz around cloud computing is absolutely crazy right now and for good reason. Unfortunately there are huge concerns for large enterprises to productively adopt the technology. For example: Big name firms form alliance to drive cloud standards Interestingly there is a large market for non-productive solutions, such as pre-sales, testing, proof of concept, etc. What’s even more interesting, SAP itself has been “eating its own dogfood” and has been utilizing cloud services for nearly 3+ years now:

Mobile Applications - Mobile applications represent a fundamentally different way that we interact with software. In enterprise ERP we often see feature rich (and subsequently clunky) applications. This is as SAP says “a game changer” as it not only means that there is a whole new way of developing software, but also their is a renewed focused on how we use enterprise BI applications.

So why will these save SAP? Three reasons:

  1. In-Memory: Other database/warehousing solutions are much faster than SAP’s current offering (such as NoSQL, Hadoop, MapReduce, etc) In-memory speeds this up.
  2. Cloud: IT infrastructure costs have grown enormously out of control. Cloud reduces that.
  3. Mobile: The adoption of mobile is quickly making itself into mainstream enterprise. Business is now done on the go. Mobile aids that.

The convergence of many of these technologies represents both a scary and opportunistic time for myself and the technologies SAP supports. It will be interesting to see how it all plays out and I’m glad that SAP has embraced disruption.