Cloud

Oracle, NetSuite, And Deloitte Partner To Deliver Integrated HCM And ERP Cloud Services

Last week NetSuite, in conjunction with Oracle and Deloitte, announced a partnership to deliver integrated human capital management (HCM) and enterprise resource planning (ERP) cloud services for the mid-market. Each of the three companies will throw something into the pot: NetSuite brings ERP, Oracle contributes HCM and of course both will be delivered via the cloud as software as a service (SaaS).  Deloitte plans to work with the two companies to develop a practice with “highly skilled practitioners specializing in tools and implementation services to help customers adopt the soon to be integrated SaaS technologies faster and more seamlessly.” The “soon to be” qualifier implies a future deliverable, so Oracle and NetSuite will also have to work together on this integration.

The partnership between Oracle and NetSuite is not new, but until now was pretty much limited to the technology stack. However, as far back as June 26, 2001, Oracle announced its “small business suite”, which was in fact NetSuite. But applications from NetSuite and Oracle never came together in any kind of substantive way. After all, in some ways NetSuite’s solution competes against Oracle’s Business Suite, as well as the ERP solutions acquired along with JD Edwards.

But NetSuite never really built out HCM functionality, choosing instead to partner. In fact, it already has several HCM partners, but they tend to have different solutions for different parts of the world. One of the biggest challenges for HCM solutions has always been the different regulations around the world, both in terms of payroll and other compliance requirements. Laws in the United States are very different from those in Europe, and even from one country in Europe to the next – and on and on around the world. Most HCM solutions start out as country-specific and never make it into the big leagues to compete on an international basis. But Oracle’s HCM solution can.

There are also quite a few different sub-segments within HCM ranging from the traditional human resource information system (HRIS) to talent management (including recruiting) to benefits and compensation, etc. It is more common to find individual point solutions for each segment than to find a full, comprehensive suite covering all of them. Hence the market is quite fragmented. Oracle is one of the few solutions that has the breadth of functionality and also serves a global market. It not only acquired expertise early in the game from its acquisition of Peoplesoft, but also more recently acquired Taleo for talent management.

The Taleo product, which is also SaaS only (like NetSuite) fits right in. But because this is a “cloud only” solution, global HR will have to come from Oracle Fusion, not the Oracle Business Suite. Fusion is still a work in progress.

The nature of the relationship between NetSuite and Oracle could best be categorized as a “referral” agreement. Oracle doesn’t sell NetSuite products and NetSuite doesn’t sell Oracle products. However Oracle has a dedicated HCM team, which will engage with the NetSuite sales team to jointly sell into NetSuite customers. This makes sense because a NetSuite ERP customer is more likely to buy Oracle HCM. That’s not to say an existing Taleo customer might not be interested in NetSuite, but I am sure the Oracle sales team would prefer to sell them an Oracle ERP. An Oracle HR customer running Oracle Business Suite or JD Edwards is less likely to buy NetSuite. Even if they were willing to consider this, the Oracle sales team isn’t going to bring the NetSuite team in for a possible replacement.

While referral arrangements are quite easy to create, there is one inherent weakness. They are also easy to walk away from. As mentioned above, right now Oracle Fusion is a work in progress. When it is a complete ERP, will Oracle still be as interested in partnering with NetSuite? Probably. NetSuite has an installed based of over 14,000 customers, so it is quite a large field of opportunity.

But what about the role of Deloitte? According to Jim Moffatt, CEO of Deloitte Consulting LLP, “Mid-sized companies are looking for solutions that allow them to be nimble and respond quickly to market opportunities. This newly integrated solution will help these organizations deliver better service at a lower cost, ultimately giving them an edge in the war for talent and a true competitive edge.”

I agree that mid-size companies are primed and ready for low-cost solutions. HCM functions have historically been under-served by enterprise applications and therefore there is a great deal of pent-up demand, particularly in the mid-market. I’m just not sure mid-size companies are ready to pay the price of a consulting firm like Deloitte. I suspect many mid-size companies will prefer the “do it yourself” approach, whether they are capable or not. Those that recognize their own weaknesses might turn to consultants, but the mind-set of a mid-size company expects a consultant to get in quickly and out just as quickly. Consultants such as Deloitte tend to like long engagements. We’ll have to wait and see how many times they get invited to the party and how long they stay.

All told though, this seems like a smart move for NetSuite. Its footprint expands without a huge development effort. Processes and functions managed by HCM solutions are quite easily integrated into ERP since they are not too deeply embedded in transactional activity. That is, unless time and attendance transactions are collected through workforce management in HCM. Even in this case, the integration is quite clean and simple. The HCM solutions market has been heating up, and this means the NetSuite team, in conjunction with its Oracle counterpart can provide a more complete and competitive solution.

Oracle also benefits from that wide open market of NetSuite customers, which get a more complete, integrated solution. As to Deloitte… we’ll see.

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SAP HANA Enterprise Cloud: Speed, Power and the Benefits of Cloud Delivered Faster

On May 7, 2013 SAP announced SAP HANA Enterprise Cloud. As the name implies, it is a cloud-based service that allows an organization to move existing (or new) implementations of the SAP Business Suite and SAP NetWeaver Business Warehouse, powered by HANA, off their own servers and into SAP’s massive data centers. Why would an enterprise want to do this? The short answer: Speed, power and the benefits of cloud computing without the disruption of replacing existing on-premise solutions. Speed and power come from HANA, adding visibility and agility to the business by enabling decisions to be made in real-time with volumes of data that were inconceivable just a short time ago. Cloud computing lowers cost and adds elasticity, allowing capacity to stretch as your business and your need for data grows.

This announcement builds on the progress SAP has made in bringing HANA to market, first with analytics and then applications powered by HANA, including both the Business Suite and Business One. Because HANA is essentially enabling technology and it is technologists that deliver the message, the significance and potential for business value is difficult to convey. This newest announcement is focused on the cloud, but without first understanding the power and potential of HANA itself, it loses its punch.  So let’s backtrack a bit and highlight what HANA brings to the party.

Speed

SAP HANA is the brainchild of SAP founder Hasso Plattner and is often referred to as Dr. Vishal Sikka’s “little girl.” Professor Plattner is Chairperson of the Supervisory Board of SAP AG and Dr. Sikka is Member of the Executive Board of SAP AG, Technology and Innovation. Both men are brilliant technologists. They speak quite eloquently about the possibilities created by this breakthrough technology, but often that eloquence is lost on business executives. The non-technical businessperson cares little about row versus column processing, in-memory databases, massively parallel processor arrays (MPPAs) or multi-threading.

However, they do care about speeding up processes like Material Requirements Planning (MRP) in a manufacturing organization or forecasting demand to optimize restocking the shelves in a retail environment. These and other “batch” processes are the Achilles heel of most ERP systems. Even as hardware innovation continues to accelerate, because they are “batch” and not real-time, they are run overnight or over the weekend. Between “runs” things change and therefore decisions get made with something less than a full and accurate picture of the world.

Benchmarks from early projects have proven that HANA can reduce these run times from hours to minutes, or even seconds, without constraining the amount of data processed. In fact doors are opening to bringing in volumes of data that were previously inconceivable. However, having been constrained for so many years, it is often difficult to look beyond current real and perceived constraints and understand the possibilities. While a business executive might not really care how this is accomplished, understanding some of the concepts to a certain extent might help business executives and their IT staffs see the possibilities. Without that vision, businesses will never make good use of the technology.

Parallelism versus multi-threading is one of those concepts. Most computers today appear to be able to do many things all at once. After all, you have multiple users logging into ERP and CRM and other applications, and you can record an inventory transaction at the same time you are entering a new customer quote or matching invoices to cash receipts, right? Not really.

A processor in a computer can really only do one thing at a time. But it breaks each of those transactions down into minute elements and strings them together into a “thread.” If the processor has 3 tasks to do, it does one element from one thread, then an element from the second thread, then one from the third before it cycles back and picks up the second element of the first thread. Because these elements are so small and this is happening so quickly, it appears as if it is doing all three things simultaneously, when in fact it is doing only one thing at a time. Think of it like going through a turn-style. Only one person fits through at a time.

Going massively parallel allows you to throw a large number of processors (or separate computers) at a task (or multiple tasks) to perform a set of coordinated computations in parallel, like adding hundreds or thousands of turn-styles. In order to do this, you might have to modify or even redesign the subway station or the football field where the turnstyles function, so it is not as simple as it might appear on the surface. But the net effect is to increase the throughput by several orders of magnitude. Yes work needs to be done to the application before it can take advantage of the power of HANA, but the potential for adding throughput, and therefore speed, is nothing short of amazing.

Of course this is an over-simplification, but hopefully it helps the non-technical business person see the vision of the kinds of massive volumes of data and computations that can be handled quickly and efficiently with HANA. One goal of SAP HANA is to eliminate the need for “batch” processing.  It reached this goal by increasing the speed at which computations can be completed. According to Prof. Plattner, “There is no batch any more. After 40 years of trying to kill it, batch is now a monster of the past. We can do this now.”

Power

While speed is great, speed for the sake of speed alone adds little business value. What is more important is the ability to make more real time decisions.

While computers and enterprise applications have opened new doors to new possibilities over the past several decades, most of us have also become accustomed to being constrained largely because our ability to generate and collect data has far exceeded our ability to process it effectively for decision-making. We need to break through those constraints in order to create the vision of possibilities:

  • We run MRP weekly. We plan and schedule assuming infinite capacity. What if we could run a full ERP the moment a new big order came in to see how it would impact the finite capacity throughout the enterprise?
  • We forecast demand by product line, not individual products, or by region, not by customer. What if, instead we could forecast by product for each customer by individual region?
  • We put a plan together to replenish shelves in a retail store mid-day based on sales last week or last month or even last year. What if we could re-plan at noon based on sales that same morning?
  • We analyze the performance of trade promotions once the program is completed. What if we could see the impact on profitability in real-time throughout the life cycle of the promotion?

Overcoming these perceived constraints requires a new way of thinking. At SAP, that new way is called “design thinking.” This concept was not invented by SAP, and SAP is by no means the only company that is doing it. But SAP has certainly embraced it fully. Virtually every employee directly involved with customers and/or products has been trained.

Design thinking is an important concept in unlocking the power of HANA. The SAP Services organization is engaged to conduct a comprehensive assessment, including a design thinking brainstorm session. The goal is to determine which solutions will have the highest performance impact as a result of moving to SAP HANA Enterprise Cloud.

Moving to the Cloud

This brings us to the real meat of the announcement: managed services delivered via the cloud. Perhaps the best way to describe SAP HANA Enterprise Cloud services is to point out what they are not:

  • This is not an option for companies to run applications powered by HANA in their own private clouds. It is really a private cloud for the customer managed by SAP. This was a purposeful decision on SAP’s part since the objective is to make the solution truly “elastic.” While this term may be common in technology circles, it is less so in the business community. Essentially, it means the customer is never constrained by hardware limitations. Data center configurations will expand (transparently to the customer) as more computing power is required.
  • This is not Software as a Service (SaaS). Customers will bring their own licenses to the party. There will be no multi-tenancy (multiple companies sharing a single instance of the software). Right now the offering includes all of the SAP Business Suite except for SRM (which has not yet moved to HANA), and/or SAP NetWeaver Business Warehouse, any or all of which must be powered by HANA. But SAP also welcomes other applications that might be developed using the HANA platform or existing applications that will first need to undergo a transformation whereby they will be powered by HANA.
  • This is not a public cloud like Amazon Elastic Cloud Compute (EC2) where any and all different types of applications can run. This is an environment specifically for HANA-powered applications.

These are managed services, where customers outsource day-to-day responsibilities for managing some segment of their solution to SAP. As part of the ramp-up process for any prospect or customer, the SAP Services organization will likely perform a comprehensive assessment, delivering advisory services to determine which solutions will have the highest impact on performance – “likely” because this is not a mandatory step. SAP pitches a design thinking session and this generally results in at least one project and may result in a whole bevy of projects or a sustained rollout.

Once a project, or projects are defined, SAP Services provides migration and onboarding solutions. For an existing SAP customer this might include bringing the application up to the latest release. Remember an application can’t just be dropped onto the HANA platform. SAP has spent a lot of time and effort “powering” the Business Suite with HANA. The fastest way to take advantage of this will be to come up to the latest release.

The ease or difficulty of this upgrade (and migration) will largely depend on how far behind the customer is and how customized its solution is, and therefore the range of difficulty will be quite broad. The prime candidates for SAP HANA Enterprise Cloud, at least initially, will be large enterprise customers, and they are most likely to have customized the application extensively. Small to midsize enterprises (SMEs) and very new large enterprise customers are less likely to require extensive customization because configuration options and the ability to tailor without programming have evolved dramatically over the past several years. But more mature implementations will probably need to overcome this hurdle.

If this, or other hurdles can be overcome, then the benefits of moving to the cloud can be very significant. The benefits are largely based on the elasticity noted above and cost related factors. The customer should never have to wait for new hardware to be evaluated, selected, delivered and configured – which is exactly what would happened if they continued to operate from their own data centers.

Mint Jutras research finds that cost and upgrade factors are perceived as the most important benefits of a SaaS offering (Figure 1). Given the tendency for many to equate cloud and SaaS (even though they are different) there is no reason why we can’t extrapolate these perceptions to this offering. Survey respondents were presented with five general categories of benefits of SaaS and asked to sequence them in order of priority (with 5 being the highest).  The numbers shown in Figure 1 (the mean average response) denote the relative order of importance.

Figure 1: Relative Importance of Benefits of SaaS

  • Cost factors: 3.59
  • Upgrade issues: 3.09
  • Support of distributed environments: 2.90
  • No hardware purchase/maintenance required: 2.75
  • Less IT expertise and staff required: 2.67

Source: Mint Jutras Understanding SaaS

While the upgrade factors can be directly applied in terms of the hardware, they will be a little different in terms of SaaS versus cloud services that are not based on a multi-tenant model. Cost factors are also a bit different. Customers will not experience savings in terms of software licenses with the “bring your own license” model. However, there should be some savings in trading hardware costs for services.

But the real cost factors come into play when you measure value. Recognize that you are making a quantum leap forward in terms of taking applications to an entirely different level in supporting real-time decision-making. Remember those “What if’s?” listed earlier? Without this type of option, most companies simply would not be able to afford this move, and even if they could, they might find it difficult, if not impossible, to keep up with the level of hardware and technology innovation being delivered today.

Key TakeAways

SAP HANA presents a whole new world of opportunity for speed and power, limited only by the customers’ ability to see the vision of what is now possible. It is most important to understand the potential and identify your own possibilities for innovation. These opportunities for innovation may be staring you in the face. Or you may have to apply some design thinking: dig deep into existing processes and identify those problems you have been living with for so long you might think they are unsolvable.

In the words of one early adopter: HANA solves problems that were deemed unsolvable in the past. As you identify these opportunities, the next question will be, “Can I afford the solution?” With the introduction of SAP HANA Enterprise Cloud services, the answer is far more likely to be a resounding, “Yes!” SAP HANA Enterprise Cloud also adds the ease of consumption of the cloud at an affordable incremental cost.

So once again, why would an enterprise want to do this? The short answer is also the best answer: Speed, power and the benefits of cloud computing.

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SAP Launches Financials OnDemand

On November 14, 2012, in conjunction with the co-located SapphireNow and SAPTechEd events in Madrid, Spain, SAP announced the general availability of SAP® Financials OnDemand. The new offering is a stand-alone financial management solution, a derivative of its SAP Business ByDesign suite, now powered by HANA for speed and power. It targets medium to large enterprises and represents SAP’s desire to compete for mind share (and deals) in specific lines of business – in this case the business executives who manage the money within an enterprise. Based entirely in the cloud and offered exclusively as Software as a Service (SaaS) it makes two important assumptions: these enterprises are willing to entrust their financial transactions to the cloud and a good portion of them want to “mix and match” applications rather than run a single tightly integrated business suite.

What is it?

SAP describes SAP® Financials OnDemand as “a real-time, insight-driven financial management solution designed for the cloud.” However in spite of the fact that SAP describes this application as one that manages money (versus people, customers or suppliers), the breadth of the solution extends beyond strictly accounting. Unlike other stand-alone accounting applications that capture those all-important financial transactions, but nothing more, Financials OnDemand expands to also include sales orders and purchase orders. This is important in that it means it can support end-to-end processes like order-to-cash and procure-to-pay and provide a system of record for all business transactions.

Mint Jutras defines Enterprise Resource Planning (ERP) as an integrated suite of modules that provides the operational and transactional system of record of the business. So in providing this system of record, is SAP Financials OnDemand really ERP in disguise? The answer to that: Not really.

Although at its core, ERP provides a system of record, in fact the functional footprint of ERP has grown steadily over the years, becoming far more complex. In manufacturing organizations it supports the planning and scheduling of production, the movement and storage of inventory, engineering and product definition and perhaps the servicing of products. It might also extend to managing the engagement with prospects and customers. It might support employees with human resource functionality. This list could go on and on. As a result, it is becoming more and more difficult to tell where ERP ends and other applications begin and it is this complexity that often presents a barrier to adoption.

The scope of SAP Financials OnDemand is more constrained, thereby reducing the complexity. But the solution also represents a different approach to enterprise applications. While ERP is tightly integrated, SAP Financials OnDemand takes a more modular approach (often referred to as “Best of Breed”) with cloud-based financials as a foundation. Using this approach, it is engineered either to stand alone or to play nicely (integrate) with other applications.

In the past, the trade-off between the two approaches was between functionality and ease of integration. Over the years the pendulum has swung between preferences for the two approaches, and as ERP has become more robust, the pendulum has tended to swing in favor of the integrated suite. But as integration technologies have matured, these trade-offs are no longer as easy to evaluate as they once were and perhaps the pendulum is starting to swing again. And while the preference for a single integrated suite has been most prevalent in smaller enterprises (with limited Information Technology (IT) resources), SAP sees the target market for Financials OnDemand as medium to large enterprises, particularly those operating across a global, distributed environment. But then, very few medium to large enterprises are not global and distributed today.

SAP has long been a powerhouse in terms of providing financial management applications for large multi-national enterprises. So it has the expertise and experience necessary to provide a robust financial application that will support a global enterprise. And the company is also smart enough not to reinvent the wheel, but instead base the solution on one that already exists. With the goal of providing a cloud-based solution, SAP Business ByDesign was the logical choice.

SAP Business ByDesign is most often referred to as a “business suite”, but it fits the Mint Jutras definition of ERP, as a tightly integrated suite of modules that provides an operational and transactional system of record, which of course, includes financials. It is also SAP’s newest ERP solution, designed for the cloud and offered exclusively as a multi-tenant Software as a Service (SaaS) solution.

Because it was designed and developed as a tightly integrated suite, accounting modules within Business ByDesign assumed other Business ByDesign modules to be the source of transactions that are ultimately recorded in the general ledger. So part of the process of bringing Financials OnDemand to market was to decouple the financial processes from that tight integration, creating a more “loosely coupled” and “pluggable” architecture. To integrate with Financials OnDemand, other applications simply need to map to its model of financial objects. For the layman, those financial objects might be customers, suppliers, orders, accounts, etc.

So we see that SAP Financials OnDemand is indeed a cloud-based financial management system, capable of standing on its own legs or fairly easily integrate with other applications. But what about the claim that it is “real-time” and “insight-driven?”

 

SAP Turns to HANA for Real-time Insights

To meet this goal, SAP turned to HANA. HANA represents some game-changing new technology. It has been described in the past as a database and also an in-memory computing engine and a platform for development. But to the business executive making a decision about a financial management solution, the underlying technology is only of interest in terms of the value it brings. The value of HANA is primarily speed and speed supports real-time data and decisions.

But there are several aspects of speed. One is the sheer computing speed. Volumes of data have increased exponentially over recent years. At the same time companies need to deal with a finer granularity of detail. For example, it is no longer sufficient for many companies to plan, forecast and manage at aggregate levels. Revenue and cost forecasts previously identified at a business unit or a regional level, must now dive down to the individual product or customer level, or perhaps even by customer and product. Think about how this inflates the volume of data and the granularity of the forecast and the speed at which the basis for decision-making changes. With traditional methods of storing and analyzing data we often measured elapsed time in hours and days. HANA has the potential of reducing that to minutes and even seconds.

But how does speed provide insight and support insight-driven financial management? If you can effectively deal with vast volumes of data, you can analyze performance that much more quickly and also more iteratively. First pass analyses often produce the need to dive deeper and possibly slice and dice the data a different way. When those iterations take days, decisions are made with the analysis at hand. There simply isn’t time for another cut, another way of looking at the detail. Insight is limited.

In the past the only way this type of analysis could be done in the proper timeframe was to anticipate how it would need to be summarized – by business unit, region, product line, etc. That meant more files and file structures. But what happens when that changes? How do you cope when the organization is restructured, the market changes, you introduce new products, or you experience a merger or acquisition?

If you have the technical power and speed to calculate what you need on the fly (ad hoc) then you don’t have to anticipate the levels of summarization, the different ways you might want to analyze the data. If all you have to do is capture the raw transaction and decide later how to summarize, slice and dice, then it makes it reduces the complexity of the setup, (no need to build in hierarchies that are hard to change later) and the file structures.

Admittedly, the elimination of the files is more value to the developers. But by making the developers more efficient, you can ultimately deliver more value to the consumer of the technology. And if you take it one step further and make it truly self-service for an astute business analyst, you remove an entire layer of delay and disruption in meeting new and changing needs of the business. This is what financial management solutions powered by HANA can deliver.

Are companies ready to put this in the cloud?

The willingness to consider SaaS and cloud based solutions has lagged the hype cycle that industry observers have created. Front office applications such as sales force automation (SFA) and customer relationship management (CRM) solutions led the way. These “engagement systems” lent themselves easily to a shared environment where instant access and collaboration are the keys to success. Yet accounting and other back office “transaction systems” seemed to be the antithesis, where control, privacy and security are paramount. But the resistance to putting transactional system of records in the cloud is disappearing and interest is not limited to small companies.

In a 2011 Mint Jutras enterprise solution study, the willingness to consider a Software as a Service (SaaS) deployment option for transaction-based systems of record increased steadily from 42% in small companies (those with annual revenues under $25 million) to 59% in large enterprises (revenue over $1 billion). The 2013 study results are now coming in and it looks like the interest in SaaS based solutions continues to grow.

Why is it that these companies are now more likely than small companies to consider a cloud-based solution? Chances are these companies are not single, monolithic organizational structures. Instead they are multi-divisional and multi-dimensional. What better way than a cloud deployment to get them all on the same financial page? While divisions or business units might have been left to their own devices in the past, today medium and large enterprises are defining standards and holding operating locations to these standards.

But will “Mix and Match” Work?

In taking this modular approach, SAP has made the assumption that customers will want to “mix and match” and pick cloud solutions that best fit their specific business problems. The further assumption is that customers will increasingly call for a cloud-based, modern financials “engine” to tie all these cloud solutions into a loosely-coupled suite with a common financial core. This approach won’t be for everyone. There will still be those that prefer the tightly integrated business suite approach. Those that find the financial management functionality of Financials OnDemand appealing but are looking for a single, tightly integrated suite might prefer the full Business ByDesign suite.

This approach is most likely to be viewed favorably in enterprises that have already ventured into the world of cloud-based solutions but not for all their needs. Perhaps they are running a cloud-based solution like Salesforce.com as a result of the sales organization feeling the enterprise solutions did not address their (sales force automation) needs. So they circumvented the IT department all on their own. Or perhaps it was with the blessing of IT. Either way, they already have experienced the (typically) lower costs, easier upgrades and better support for remote work forces that a SaaS solution can provide.

Now might be the time to offer them an alternative to existing legacy solutions or predominantly on-premise based solutions. In this case a cloud-based solution, particularly one that is loosely-coupled, might fit well into their existing environment without causing a complete rip and replace of all existing solutions. Add to that the speed and power of HANA for real-time insights and you might just have a perfect storm that results in a significant step forward for the progressive business.

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Understanding SaaS Enterprise Applications

In spite of the proliferation of discussion about cloud computing, there is still an enormous amount of confusion and misperception about Software as a Service (SaaS) deployment options for enterprise applications. This is often fueled by industry ”experts” and the solution providers themselves using the same terms with different definitions of cloud, SaaS and multi-tenancy. While it is important for buyers and users of enterprise applications to understand the terminology being bandied about, it is even more important to be asking the right questions to make sure their specific goals and requirements will be met. It’s less about the labels and more about the characteristics that are needed to meet these objectives.

Cloud versus SaaS

There is still much confusion over cloud and Software as a Service (SaaS) delivery models and the more discussion in print and online, the cloudier the issue becomes. This confusion prompted Mint Jutras to conduct an online survey to assess the level of understanding of SaaS and determine preferences for deployment models for a variety of enterprise applications. Many use the terms “cloud” and “SaaS” interchangeably, but indeed they are not the same. Therefore in this recent survey of representatives from over 300 participating companies, Mint Jutras was very clear in defining how the two terms would be used in the context of the study. The distinction is quite simple and need not be over-complicated.

As a prelude to the survey and for our purposes here, we use the following definitions:

  • Cloud refers to access to computing, software, storage of data over a network (generally the Internet.) You may have purchased a license for the software and installed it on your own computers or those owned and managed by another company, but your access is through the Internet and therefore through the “cloud,” whether private or public.
  • SaaS is exactly what is implied by what the acronym stands for: Software as a Service. Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or another’s) computer. It is accessed over the Internet and is generally paid for on a subscription basis. It does not reside on your computers at all.

Using these definitions, we can confidently say all SaaS is cloud computing, but not all cloud computing is SaaS.

 Multi- versus Single-Tenant

Much of the discussion and debate over SaaS enterprise applications focuses on whether the SaaS applications are single- or multi-tenant solutions. In spite of the escalated level of chatter over this distinction, 57% of our survey respondents admit they do not understand the difference between the two. While 34% don’t seem to care (leaving that for others in their company to worry about), 23% admitted to not understanding but asked, “Please explain.”

Because subsequent questions asked about preferences between these two “flavors” of SaaS, it was important to present definitions of both. Again we kept it simple and we did not lead the survey respondents (or the reader here) with a conclusion that one is better than the other. You will find some industry observers that passionately insist SaaS solutions must be multi-tenant in order to be “true SaaS” and some offer quite a long laundry list of conditions that must be met before they will anoint a solution to be what they consider truly multi-tenant.

The definitions presented were much simpler:

  • Multi-tenant SaaS: Multiple companies use the same instance of (hosted) software. Configuration settings will vary per company and data is protected from access by other companies (tenants).
  • Single-tenant (or Multi-instance) SaaS: Each company is given its own instance of the (hosted) software.

These were presented to all survey participants, but for those who indicated they knew the difference, we went on to ask if they would agree with our definitions. The majority (65%) fully agrees with this definition. An additional 31% generally agrees but might slightly modify or add more qualifications. But when asked to present their own definitions we discovered more confusion. Some confuse multi-user applications with multi-tenancy. Others confuse access (presumably through cloud computing) over a distributed environment with SaaS and some voiced opinions on one or both but did not define either. Yet a certain level of understanding is a prerequisite for making good decisions.

Decisions, Decisions: How to Deploy Enterprise Applications

So how are decisions about deployment options made today? For many this is not a singular decision that is applied to all different types of application. Forty-one percent (41%) say the decision will vary from application to application even though many have “standards” defined for either all applications or selected applications (see sidebar). But “standards” can mean different things including which packaged software is selected, master data management, as well as deployment options. The vast majority (93%) feels these standards do however have some impact on deployment options that are chosen and about half (49%) feel SaaS options make standards easier to implement and enforce.

Conflicting Views: The Experts Versus the Consumer

Many experts today insist on multi-tenancy, however this choice has more impact on the vendor than the consumer of the software. Maintaining a single copy of the software instead of a separate instance for each customer means far less cost and effort for the solution provider. These savings can translate to lower cost and/or more innovation for the end user of the software but many of those end users only see the limitations, which they assume multi-tenancy imposes. Few have defined either multi- or single tenancy as a preferred option and single tenancy seems to have a slight lead in consideration.

But is that because they assume limitations of multi-tenancy that may or may not be real? And while the “experts” might be pushing multi-tenancy, is that really the question users should be asking?

Presumably the added efficiency of multi-tenancy allows the solution provider to focus more resources on improving the technology and developing more features and functions, which directly benefits its customers. That translates to more innovation delivered. But if the solution provider makes the same solution available on-premise, the frequency of releases may be constrained by its customers’ ability to upgrade frequently. So perhaps instead of asking whether the solution is multi- or single tenant, the better question is, how frequently is the software updated?

Is there a perceived downside to multi-tenancy? Yes, there can be. Many assume that a multi-tenant environment equates to “plain vanilla” applications that cannot be modified or tailored to their own needs. That may have been the case years ago when customizing software meant modifying source code, but today’s modern technology allows a tremendous amount of configuration and personalization without ever going near source code. So perhaps instead of asking whether the solution is multi- or single tenant, the better question is, what level of configuration, tailoring and personalization is supported?

Another potential concern over multi-tenancy is the perceived loss of control over the upgrade process. Indeed in a multi-tenant environment, the customer often has little control over the timing of the upgrades. However is there really a negative impact? If the solution provider bears the burden of the effort associated with upgrading and innovation is delivered in such a way that the customer may optionally choose to take advantage of an enhancement – or not – then there is no down-side and a lot of up-side.

Yes single tenancy potentially affords you more control over the timing of an upgrade, but there are other ways to exert control. Some vendors will actually support multiple versions in a multi-tenant environment. So perhaps instead of asking whether the solution is multi- or single tenant, the better question is, how is the upgrade process engineered and executed and/or whether all enhancements are designed to be “opt in,” only visible to the users when the customer chooses to turn them on?

These are just some examples of how to ask the right questions to make sure the SaaS solution, whether it is single or multi-tenant, meets your needs. Watch for more highlights about SaaS enterprise applications to make sure you are asking the right questions.

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SAP’s Cloud Strategy: Striving For Clarity

Sometimes procrastination pays off. Whenever I attend an event like SapphireNow, I always write something about it. In the case of Sapphire in particular, I usually have several things I want to “say.” But it has been over a week since I headed out from the event (a bit early this year) and yet this is my first attempt to write anything. Why? First of all, I was on the road, but that usually doesn’t stop me. The bigger reason… I had been really looking forward to hearing about (and writing about) SAP’s cloud strategy.  With the acquisition of SuccessFactors and the reorganization of the teams, I had a lot of questions. Unfortunately the presentations (to groups both large and small) this year created more new questions than they answered and I struggled with how I could publicly voice my lingering questions and concerns constructively.

But before I resolved that dilemma, the picture changed.

Yesterday (May 22, 2012) SAP announced it would expand its cloud presence through the acquisition of Ariba. While I know Ariba quite well, I haven’t followed the company closely over the past several years. The SAP announcement said, “Ariba is the second largest cloud vendor and runs the largest global trading network, driving more than $319 billion in commerce transactions among more than 730,000 companies.” The acquisition will make SAP a clear leader in cloud Supplier Relationship Management (SRM) and also has a direct impact on some of my concerns.

My Questions

To put this in context, let me explain some of the questions I had after I heard Lars Dalgaard, former SuccessFactor CEO and now SAP Executive Board Member, speak about the company’s cloud strategy. During his keynote, and also in a press release launched during the show, cloud solutions were announced for four lines of business to manage people, money, customers and suppliers. That statement alone raised no red flags with me. Every company deals with those four elements in some form or another. But the comment Lars made next did cause concern. He added something along the lines of, “That covers everything any company would need.” With my own roots extending deeply in the manufacturing space, my first thought was, “Did I hear that right?” Those four elements are indeed critical to every manufacturer, but there’s also more to manage, like inventory, planning and scheduling, engineering and production. I Tweeted:

Didn’t hear @LarsLuv talk about #Manufacturing processes in #cloud #sapphirenow

So just to be sure, in the press conference that followed, I asked if this had been an oversight or had SAP specifically decided against competing in this market. The answer I got (from Lars himself) was that SAP thought the interest and demand for other solutions far outweighed the interest and demand for manufacturing solutions. This included solutions that surround ERP with functions such as CRM and HCM. History bears this out. Adoption rates for cloud solutions for these extensions far exceeds cloud-based ERP. But that’s more about what’s running in the cloud, not what kind of company is running it. So that implied (but didn’t specifically state) that other applications were a higher priority for the cloud than ERP.

OK, that’s a business decision and SAP appeared to be going where the easiest sell and the most opportunity was. I followed up with another Tweet saying it didn’t look like SAP was going after the same market as Plex Systems, a SaaS only ERP solution provider that markets and sells exclusively to manufacturers. Response in the Twitter stream went like this:

Hide conversation

 

William_Newman: RT @ERP_cindyjutras: Didn’t hear @LarsLuv talk about #Manufacturing processes in #cloud #sapphirenow > can already happen w/ @sapbydesign 11:46am, May 15 from Twitter for iPhone

 

LarsLuv: @William_Newman @erp_cindyjutras @sapbydesign that’s right, and we’re excited about this 2:23pm, May 15 from Twitter for iPhone

Now of course, having followed Business ByDesign since its very first coming out party in New York City in September 2007, I knew it had manufacturing functionality and I have spoken with more than a few manufacturers that use it today. That was partly why I asked the original question. But these exchanges left me more confused. I don’t expect the guy at the top to get mired in the details, but is SAP going after manufacturing with cloud solutions or not? I know it has a strong solution in on-premise solutions (the Business Suite and Business All-in-One plus complementary manufacturing and supply chain planning and execution applications), and I know partners strengthen the Business One offering for manufacturers. But I’m left thinking ByDesign will compete better against NetSuite’s solution for light manufacturing than it will against Plex Systems’ Plex Online or other mature ERP solutions for manufacturers now offered in various flavors of SaaS or hosting.

So what about ERP in general?

The second sentence of the cloud strategy press release continued, referring to the four lines of business, “These are planned to be offered in a consistent way and seamlessly integrated into enterprise resource planning (ERP) business software.” Now we already heard that SAP was responding to demand for other applications that extend and surround ERP (like HCM and CRM), and this statement implies these other applications will be fully integrated with ERP. Indeed Lars talked both about “loosely coupled end-to-end integration” and the press release states, “SAP plans to deliver its multitenant cloud solutions as a loosely-coupled suite of best-of-breed applications.”  But nowhere in the press release did it specifically talk about delivering ERP as part of the cloud strategy. Yet if Business ByDesign isn’t ERP then I wouldn’t know what else to call it today. And it is only available as a multi-tenant SaaS solution (i.e. via the cloud). Does this mean ByDesign will be transformed from ERP into a loosely-coupled suite of best-of-breed applications? Is there a difference?

Loosely Coupled versus Tightly Integrated

The difference lies under the covers. There is work to be done in order to make this transformation. SAP will be pulling different components out of ByDesign so they can stand alone. Finance will be first and in fact will be the solution to satisfy the “money” line of business referenced previously. This allows SAP to bundle different elements together like finance (money) and human capital management (employees). Other functions will be prioritized and extracted in the future, but finance is the logical place to start as it is probably the most marketable as a separate “best of breed” application.

Everyone needs general ledger, accounts payable and accounts receivable and many smaller companies are intimidated by the thought of implementing a full blown integrated ERP. And in offering these loosely coupled applications it provides the customers with more choice to keep other non-SAP solutions or even to buy new non-SAP solutions. While this provides more choice, it also encourages complexity and makes less business sense from a cross-sell and up-sell perspective.

The advantage of a tightly integrated ERP is the ability to eliminate redundant data and reduce complexity. There used to be an intrinsic functional advantage of “best of breed” applications over those included in ERP. The disadvantage (trade-off) of course was lack of integration. But those functional differences have shrunk over the years as ERP solutions offer more robust features and functions even in some non-core modules. And there is no integration required between the modules of ERP – it is all built in.

In terms of redundancy of data, with integrated ERP there is only one customer master shared by order management, accounts receivable and any other function that deals with customers. There is only one supplier master file shared by purchasing and accounts payable and perhaps manufacturing planning. This is one of the reasons most ERP vendors have moved away from selling individual modules in favor of a bundled set of core modules and charging on a per user basis. A customer using fewer modules will have fewer users and pay less. As they expand into new areas, they add more users (and pay more), but there is no additional license or installation to worry about.

SAP appears to be bucking this trend and moving in the opposite direction, moving from fully integrated ERP to loosely coupled best of breed applications. So in pulling out the finance function, SAP will need to bring the customer and supplier master files along with them. OK, that’s just a packaging issue. But those same customer and supplier files will also have to be bundled with best of breed order management and purchasing solutions. Then if a customer buys finance, order management and purchasing, will they have two copies of a customer master and two copies of a supplier master? Probably not. There are other ways to handle this – most likely by defining these masters as meta data. And it makes it easier to deal with multi-vendor solutions. Good for the customer, not as good (business-wise) for SAP. This isn’t especially difficult, but it will mean that developers will be working on this instead of working on innovation.

How does Ariba change the game?

Today all cloud offerings across these four lines of business: customers, money, employees and suppliers are managed in a single business unit run by Lars Dalgaard. When (and of course if) the acquisition is completed, Ariba will run as a separate SAP company. SAP has done this twice before rather successfully – first with Business Objects and then with Sybase. Eventually both were quietly merged into the SAP fold.  But in the meantime, there will be two business entities within the SAP corporate structure that together provide all the cloud offerings. When that happens the supplier area will land in the house of Ariba, as it should.

I actually think this will be a very good thing. Lars has great experience with Human Capital Management. He has a proven track record for delivering on a go-to-market strategy (something that has been lacking with Business ByDesign) and he has the necessary cloud DNA. He’s already brought energy and focus to SAP’s cloud strategy. But a global trading network and experience with supply chains and supplier networks is something that fits much more naturally into a manufacturing (and also a distribution) environment and Bob Calderoni (current CEO of Ariba) clearly has more experience on that front. Will Business ByDesign be divided up and shared or will it stay with Lars? I suspect had Bob been at Sapphire I might have gotten different answers to my questions about manufacturing and maybe even those about Business ByDesign.

Bottom line though… even as Bob and Lars manage different segments of SAP’s cloud strategy it is imperative that they work together as a single cloud team. The SAP co-CEOs said as much. And eventually SAP will quietly merge Ariba into SAP proper. At that point there may only be room for one of these powerful leaders at the top. Will this fact influence the journey up until that happens? Time will tell.

 

 

 

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Does SAP’s Cloud strategy reflect a convergence of trends?

For quite a while now, we’ve been hearing three major themes from SAP: in-memory, mobility and on demand. In-memory (HANA) seemed to dominate the discussion at Sapphire in Orlando and then again at TechEd in Las Vegas. Mobility took on a little more prominence in the discussions at the co-located (Sapphire and TechEd) events in Madrid. But it was the on demand theme’s turn to be front and center at the SAP Influencer Summit in Boston this week. Usually this is a one day event, with some follow-on special interest group meetings the following day. But this year, SAP felt its cloud strategy merited an entire day two for all.

Early on day two we heard Peter Lorenz, Corporate Officer and Executive Vice President of OnDemand Solutions say something that I think set the stage quite well: “We don’t have pieces of a strategy. We really have a cloud strategy.” This implies a re-think and a holistic approach. Cloud of course is not new at SAP. The company entered the cloud world several years ago with the introduction of Business ByDesign. But that product had some false starts and the installed base hovered at 40 “charter” clients for a long time before SAP was ready to really go to market. At the end of Q3 SAP claims 650 customers and is still confident in predicting it will reach 1000 by the end of the year (yes, only two weeks away). There is a lot of back story here, but the real turning point was when ByDesign became multi-tenant last year, allowing SAP to profitably scale the OnDemand business. Also a factor… the release of the ByDesign Software Developer’s Kit (SDK) to allow partners and customers to extend the solution.

So what is SAP’s strategy and how does this reflect a convergence of trends?

SAP’s Cloud Strategy

An important aspect of SAP’s cloud strategy is that it is at least partially a result of listening to its customers. SAP execs heard customers asking them to “protect cloud dynamics” while leveraging existing processes and investments. “Protect cloud dynamics” sounds bit like marketing spin to me, but I think it means that customers want all the benefits of cloud deployments and yet many are not in a position to abandon some, any or all of their existing solutions. SAP has heard that speed of deployment is what people like best about the cloud. My research indicates speed of deployment is certainly one very important factor but the top three perceived benefits are all about costs:

  1. Lower total cost of ownership (52% of respondents)
  2. Reduced cost and effort of upgrades (48%)
  3. Lower startup costs (46%)

Yet faster often equates to lower costs – because time is money.

Technology-wise SAP’s cloud strategy is based upon the platform it created in developing Business ByDesign. This too is not new news. Business ByDesign is part of SAP’s SME product portfolio and is an integrated business management suite intended to address the end-to-end business processes of a diversity of small to midsize enterprises. As such it fits my definition of Enterprise Resource Planning (ERP): an integrated suite of modules that forms the transactional system of record for a business. ByDesign is delivered exclusively as Software as a Service (SaaS). It’s a good platform choice since the product was developed from scratch for the cloud. I think you will soon see SAP repositioning it in the context of company size. Even now, ByDesign targets both SMEs as well as subsidiaries of large enterprises.

Since SAP announced the ByDesign platform as the strategic platform of choice for OnDemand solutions last year, it has also been using this platform to develop additional “Line of Business (LoB)” solutions. I have always found the reference to LoB a bit confusing, because any enterprise application should be designed for the business. But in this context I have really found it to mean extensions to ERP that are designed for a single functional area of the business – I suppose you could say, a single “line” of business role. But (less intuitively) LoB here also refers to a cloud deployment model. Examples of these are:

  • Sales OnDemand
  • Service OnDemand
  • Travel OnDemand
  • Career OnDemand
  • Sourcing OnDemand
  • Carbon Impact
  • Sales and Operations Planning (S&OP) OnDemand

Streamwork and Crossgate round out the OnDemand portfolio, providing collaboration services. But SAP is not relying exclusively on its own development efforts to bring end-to-end OnDemand solutions to market. Today there are more than 40 ByDesign partners and 70  ByDesign applications that have been developed using the SDK. SAP expects to continue to round out the framework and the base product but fully expects its ecosystem to supplement that functionality, particularly to address vertical industry requirements and to provide localizations for subsidiaries in countries that are not yet on SAP’s three year roadmap.

SAP’s strategy is to have OnDemand solutions sold by a dedicated cloud “go-to-market” organization which will be direct for large enterprises and indirect (through a channel) for SMEs. SAP sees a huge opportunity for this dedicated sales force in selling to all its 176,000 customers, which also includes the Sybase installed base of customers.

Now of course the finer points of the strategy are subject to change because of SAP’s recent announcement of its intent to acquire SuccessFactors (SFSF). SFSF calls itself a “Business Execution Software” company, but I put it in the category of Human Capital Management (HCM) software. While employees are certainly critical to the success of a business, for a lot of types of companies (e.g. manufacturers), there is a lot more to manage than people.

But the category of software is far less important here than the fact that SFSF’s business is entirely SaaS and Lars Dalgaard, founder and CEO, is also part of the package. Technology is only one part of providing cloud-based solutions, which are designed, built, sold, delivered and serviced differently than traditional on-premise solutions. And those traditional solutions are what made SAP the giant company it is today, making it a relative newbie in the on demand world. Co-CEO Jim Hagemann Snabe was quick to point to SFSF’s cloud DNA as a driving factor behind the acquisition.

Spotting the trends

So how is this strategy reflective of both historical and emerging trends in the software world? Three different trends come immediately to mind: trends in cloud computing, multi-tier ERP and mobility.

Cloud trends:

The topic of cloud deployment of enterprise applications has been heating up for the past several years. While ERP has lagged behind in terms of interest and adoption, cloud-based applications surrounding ERP have trended upwards. Now the barriers to acceptance of SaaS ERP appear to be crumbling. The 2011 ERP Mint Jutras Solution Study found almost half (45%) of over 950 qualified respondents would consider SaaS/On Demand as a deployment option if they were making an ERP selection today. The companies with the top performing implementations were even more likely to consider SaaS (62% of what we defined as “World Class”). Even more interesting, the percentage that would consider a traditional on-premise deployment was down to 56%. In years past, this would have been between 85% and 90%. And only 38% of World Class would consider traditional on-premise.

Expanding the target for ByDesign beyond SMEs to include subsidiaries of large companies is also in line with trends. While many think of the market for SaaS ERP as primarily small companies, the Mint Jutras ERP Solution Study found the interest in SaaS deployment did not decline with increased company size. In fact it escalated from 42% in small companies (those with annual revenues under $25 million) to 59% in large enterprises (those whose annual revenues exceeded $1 billion).

And looking beyond ERP to those LoB solutions, it is very likely that even those with existing on-premise solutions are keen to extend those processes with cloud extensions to leverage cost savings and speed of deployment. While we found lower cost to be the primary appeal of SaaS, more frequent updates and ease of supporting remote employees and remote operating locations were also significant factors.

However, while SAP sees all 176,000 of its customer base a prime target for these LoB solutions, I am not sure I would agree. More than 78% of SAP customers are SMEs. Sure very small companies could benefit from the functionality, but they can also live without it and there are very cheap (sometimes free) alternatives that will be “good enough” for the low end of the market. Take for example Expensify as an alternative to Travel OnDemand – a solution to make the capture, submission and reimbursement of travel expenses simple for all your road warriors. Of course SAP’s solution is more robust, but will a small company pay for Travel OnDemand when Expensify is free?

Multi-tier ERP:

The ease that “cloud” delivers in connecting remote employees and managing remote sites brings us to the second trend: that of a growing need for a multi-tier ERP strategy. Once upon a time a company generally had to be of a certain size (think fairly big) before it had to deal with multiple operating locations. That is no longer the case. In fact in our same ERP study, 67% of all our survey respondents had more than one operating location (served by ERP) even though our survey sample included companies of all sizes from very small to very large. Even small companies (revenues under $25 million) averaged 2.5 operating locations. Of course this average escalated steadily to 10.7 in companies with revenues over $1 billion.

Another shift: “back in the day” even if there were multiple operating locations, different sites might have little to do with one another. But in today’s globalized environment that is rare. We have shared services, feeder plants, decentralized distribution for centralized manufacturing and centralized distribution for decentralized production; all creating a growing need for collaboration. With little interoperability, historically individual business units or divisions might have been left to their own devices to select and implement enterprise applications, including ERP. But as the need for interoperability grows, leaving everyone to do their own thing can create a nightmare.

Today 98% of top performers (and even 84% of all others) define standards for ERP implementations, but that doesn’t necessarily mean a single ERP used at corporate headquarters and also at all operating locations. It might mean a single corporate ERP and one or more “standard” ERP solutions, depending on the level of autonomy or interdependence between sites. In fact we found that World Class implementations were more than 2 ½  times as likely to use a two tier standard (one ERP at corporate and a single different ERP at the divisional level) and 1 ½ times as likely to use a multi-tier standard (two or more “standards” are defined for business units).

What does this have to do with a cloud strategy? What better way to implement, enforce and control the “standards” at multiple, remote operating locations than through a SaaS deployment model? This is especially true if remote sites are in emerging markets where IT talent and ERP experience are rare commodities?

Mobility:

Which brings us to the final trend: an increasingly mobilized world. This is one area where emerging markets do not necessarily lag behind mature markets. Everyone carries some sort of mobile device today, sometimes multiple devices. By untethering ourselves from the wired world, we have actually tethered ourselves more to the business and expect to be connected “on demand” sometimes 24X7.

This is why mobility is at the forefront for the ByDesign platform, which currently supports BlackBerry, Windows Mobile 7, iPhone and Android. Mobile scenarios include sales, approvals, expense reports, and analytics. Feature Pack (FP) 3.5, due out in January will focus on the iPad, which seems to be emerging as the tablet of choice for executive management and sales. FP3.5 will deliver sales catalogs, account management, lead and opportunity management on the iPad.

Wrap-up:

Cloud strategies are a hot topic of discussion today.  However, sometimes the more vendors and industry “experts” discuss the topic, introducing their own definitions and requirements, the more confused the general audience becomes. So far SAP has resisted being dragged into the fray of accusations about “cloud washing” and “false clouds.” In evaluating SAP’s strategy, the reader would also be advised to evaluate the offerings based on their own individual needs rather than on any one person’s definition of “true SaaS.” After all, not all companies have the same needs or desires.

And in fact I believe eventually “cloud” as a topic will cool down significantly. One day in the not too distant future, deployment option will become just another check box. It won’t matter so much how it is deployed, only that it solves your business problems.

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Is there a “social revolution” happening?

Cloudforce 2011 Boston attracted record crowds yesterday. The ballroom was packed, as well as a large overflow room. At first glance you might have thought the Stanley Cup champion Bruins were going on stage instead of Salesforce.com CEO Marc Benioff. Mr Benioff and company were in town to usher in what they call a “post-PC social revolution” and to inspire both people and companies to become entirely social, mobile and open.

I don’t generally present myself as a “CRM analyst” so you might wonder what I was doing there. I do consider myself an “enterprise application” analyst, with an emphasis on business (don’t think of me as a “techie.”) At the center of enterprise applications lies Enterprise Resource Planning (ERP), but the boundaries of ERP have been blurring for the last few years and you have probably heard me say it is getting more and more difficult to determine where ERP ends and other applications begin. So I spend almost as much time on the periphery as I do deep inside ERP. Certainly the products and services Salesforce.com has to offer directly impact the performance of the business and hence are on my radar in terms of making enterprise applications pay dividends.

However, getting back to the theme of the day… I am not quite the cloud purist that Mr Benioff appears to be, but I do value the benefits cloud has to offer. In terms of this social revolution, being rather old school and somewhat of an introvert, I still need to be convinced that all businesses will be social businesses and social media is the answer to all the ills of the business world. But I do look around and acknowledge that we are indeed in the midst of a form of revolution in terms of communication and expectations.  Much of the basis of communication in social media is sound bites. So in the spirit of “social”, I’ll recap yesterday’s keynote by sharing a few quotes from the stage. In doing so, of course I risk presenting something out of context, but rest assured, I just present them here as food for thought. Munch away….

On cloud computing…

“We were born cloud. We are being reborn social.”

“We need a cloud computing test… if it’s about hardware, it’s not about the cloud.”

“These are the ghosts, the forbidden elements. If you don’t have automatic upgrades, the elasticity, the scale, the energy efficiency; if it is still only for the elite; if it’s not democratic, it’s not cloud.”

 “We will have transitionary technology. Private clouds are the screen scrapers of this generation.”

“Beware of the false cloud.”

“We are making this movement to public cloud; nothing can stop this.”

“For those who didn’t get into the cloud, I’m sorry; we’re moving on.”

On Social…

“We have reached an inflection point. The number of social users now exceeds the number of email users.”

“Facebook is rapidly becoming the Internet – it is where people are going for information. Twenty-two percent (22%) of Internet time is now social.”

“The social revolution is creating a social divide. Is your company social?”

“It’s not enough to know your customers. Delighting customers is knowing who they are and what they ‘like’.”

“Make employees, partners and customers your “friend.”

“Lotus Notes was conceived before Mark Zuckerberg was.” [I’m still trying to figure out the context of this, but couldn’t resist]

“Marketing is no longer about eyeballs and ears. It’s about hearts and minds.” Marcel LeBrun, Radian6

“You can’t just move into the future. We need to bring the past into the future.”

“A ’brand’ is no longer a series of memories, but a series of engagement.”

OK, apart from these few sound bites, was there anything else that convinced me that the social revolution is really about business? Yes, a few. For example, I learned about the value of a private social network based on Chatter and Sales Cloud. I saw the value of following not just people, but deals (think sales process) or accounts (think servicing customers). I saw Pepsico monitoring its Gatorade brand through a Network Operations Center and Dell doing the same from its social media command center.  I was very impressed to learn about KLM’s Surprise program. The airline watches for people who announce (through Facebook or Twitter) they will be traveling on a KLM flight, find out a little about them from their social media communications and then surprises them with a small gift at the gate. The result…

“It is so much more rewarding to put a real smile on someone’s face than to see a smiley face emoticon.”

Which is exactly why I think “social” media isn’t necessarily all that social. I guess it is good that it helps those with no social skills connect. And it’s great if it can be used as a tool to develop the kind of personal and business relationships that are based on trust. But there is a risk in becoming so absorbed with social media that it becomes the only way of “engaging” and good (and real) relationships are the heart and soul of good business. I’ll take a hand shake and a real conversation any day over the impersonal tweet and post. But then, what will be the first thing I do after posting this to my blog? I’ll tweet it.

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NetSuite ERP+CRM+Demand Planning=Better Inventory Management

Earlier this week NetSuite announced a new module for its cloud-based business management suite. Targeting wholesalers, manufacturers, retailers, and distributors NetSuite Demand Planning enables companies to forecast demand, create a supply plan and manage inventory in order to minimize stocking levels yet effectively and efficiently meet customer demand. NetSuite Enterprise Resource Planning (ERP) provides a solid foundation for inventory management. The new module extends the functionality with statistical forecasting based on historical usage, recognizing seasonal trends and suggesting optimal order points. But the module doesn’t stop there. Drawing on its strong heritage in sales force automation (SFA) and customer relationship management (CRM), NetSuite also takes into consideration sales data, pipeline and forecast.

Right now, this is an either-or proposition. You either let historical demand drive the demand plan (which then drives the supply plan), or you look to the sales forecast. Different environments will dictate which is more appropriate. For a consumer product, perhaps commodity-driven business, history is probably provides the best guidance. But in launching a new product or in the case where demand is volatile, the current pipeline is a better indicator. Of course, being able to do both brings the best of both worlds. And NetSuite Demand Planning allows you to do either, but not both at the same time, for side-by-side comparisons. While these comparisons would be nice to have, in fact companies seldom operate this way. Even today NetSuite customers could occasionally run two separate scenarios and manually compare the results in order to determine which provides a more accurate prediction of future demand. After all, we all know the only thing for certain about a forecast is that it will be wrong. It is the degree of “wrong-ness” that you need to measure and manage.

Incorporating demand planning into the mix of enterprise applications is not unique today and it is not unheard of to have this functionality embedded in ERP. However, when it is an embedded module of ERP, it is not as likely to include the ability to use the sales forecast, since the sales pipeline is not typically something that ERP manages. Also this functionality is just as often provided through separate extensions to ERP. Therefore the fully integrated nature of NetSuite Demand Planning is a plus. The input can come from ERP transactions or SFA pipelines and forecasts (both native to NetSuite) and the output is automatically generated purchase orders and work orders.

NetSuite has taken a workflow approach to the process, including five steps:

  1. Calculate demand (based on inventory transactions or sales forecast)
  2. Review and edit the demand plan (manual adjustments can be made)
  3. Calculate Supply
  4. Review and edit the supply plan (manual adjustments can be made)
  5. Generate work orders and purchase orders (POs) to meet the demand

In creating the demand plan, users are able to select a single item or groups of items to create the demand plan for, and in doing so can choose Linear Regression, Moving Average, Seasonal Average, or Sales Forecast. So indeed, different items can be treated differently. The system also allows you to select how much history, and how much to project into the future. Similar options are available in creating the supply plan.

Overall, the benefits to NetSuite customers, and what might make this attractive to manufacturers, distributors and retailers evaluating the solution provider include:

  • Efficiency: the implementation of a Demand Planning solution can significantly reduce the amount of time spent planning inventories. Without such a solution, companies often resort to the ubiquitous spreadsheet. While familiar and easy to work with, even if data is directly exported from ERP or CRM/SFA, once it becomes embedded in a spreadsheet and starts to travel through the process, it tends to take on a life of its own. The further away from the source and the application which will eventually execute the supply plan, the more danger in it not reflecting reality. And remember the plan does need to eventually be reflected back in ERP in order to cut PO’s and release work orders.
  • A better plan: The goal is to reduce stocking levels while improving delivery. Often these two goals appear to be conflicting. But remember, increased inventory levels, may not indeed insure better performance. Having the right inventory at the right time, in the right place is the goal.

This module, while fully integrated, does need to be purchased separately. If you are a distributor, retailer, wholesaler or manufacturer currently running NetSuite and looking for a way to better manage inventory, improve efficiencies and increase on-time and complete shipments, NetSuite Demand Planning is certainly worth a look. For those prospects considering NetSuite, this module adds functionality, broadening the NetSuite footprint and should be part of the evaluation.

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Quick Update from QAD: BI, Mobility and Cloud

I wasn’t able to attend QAD’s Explore customer event this year. But the power of the web let me follow along for keynotes and Derek Singleton from Software Advice shared with me a couple of videos he shot with Phil Freidman, VP of industry and product marketing talking about the three key areas of focus of the conference: Business Intelligence (BI), mobility and cloud. Sound familiar? Yes mobility and cloud are hot topics with regard to any enterprise applications today and BI functionality embedded with Enterprise Resource Planning (ERP) is also drawing significant attention. ERP solutions have always been good at collecting and storing mountains of data but that data has often (and notoriously) been hard to extract for decision making.

QAD’s approach has been to combine BI with mobility. Its BI suite is now about one year old and therefore has achieved some level of maturity. It comes with a schema and data base model built in for QAD applications, but also is able to bring in external data (think potentially massive data from retailers). The analytics feature “what if” and “drill down” capabilities as well as integration with other solutions and what QAD calls “outbound transformation” (think export data to Excel). The tie-in to mobile is through iPhone and Android devices and a new release that brings a more robust BI solution to the iPad. Look for more mobile applications (e.g. for approvals) coming in the future.

I also heard an update today on “On Demand” by listening in to QAD’s first quarter (for fiscal year 2012) earnings call and heard subscription revenue, which includes QAD’s on demand deployment option, was $2.2 million, compared with $1.1 million for the same period last fiscal year. QAD offers its On Demand ERP worldwide and has been particularly successful in life sciences and automotive. It signed eight new ERP on demand sites in Q1 2012.  Other positive news on the call –

  • Total revenue grew 17% to $59.4 million for the first quarter of fiscal 2012, compared with $50.8 million for the first quarter of fiscal 2011
  • Professional services revenue was the biggest driver of growth to $16.5 million, compared with $12.3 million for the first quarter of fiscal 2011
  • Net income for the fiscal 2012 first quarter grew to $1.0 million, versus a net loss of $1.2 million,  for the fiscal 2011 first quarter

Good to see one of the last single product ERP vendors back in the black and on track for what are proving to be the hottest trends in ERP in 2011. Listen to Phil for yourself:

http://www.softwareadvice.com/articles/manufacturing/whats-new-in-qad-2011-1051811/.

And here’s a link to Software Advice’s  manufacturing page: http://www.softwareadvice.com/manufacturing/

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