SAP Business One

SAP Business One: The Next 20 Years

Becoming an ERP Platform

SAP Business One turned 20 last year. If it were a human, that would mean it was poised to enter the prime of its life. If it were a dog, it would be getting very long in the tooth, unable perhaps to learn new tricks. In software years, 20 is often thought of as mature, but equally as often viewed as ancient. Indeed some 20 year old enterprise resource planning (ERP) solutions are truly approaching “end of life.” Often referred to as “legacy” solutions, these are the ones that are still based on outdated technology, have changed very little over the last decade or more, and are still based on their original, outdated technology and architectures. Fortunately for the more than 55,000 customers running their businesses with SAP Business One, this ERP solution for small to mid-size businesses (SMBs) has come a very long way since it was first introduced.

But SAP believes it still has a long life ahead and is aggressively planning for the next 20 years. But, just as today’s solution bears very little resemblance to the original single-user system (running on a Mac), the SAP Business One of the future will look, feel and be something different than it is today. SAP Business One is becoming more than just ERP. It is becoming a business process platform. That means it will be open, extensible, and poised to meet very specific needs across many different verticals… and fully capable of being delivered through the cloud as a service.

Why a Platform?

Periodically pundits in the software industry try hard to kill off ERP, largely based on old perceptions. Let’s face it: Nobody recalls the early days of ERP as “the good old days.” Early ERP solutions were rigid and inflexible, hard to install and implement and even harder to use. Functionality was limited (and limiting) and implementations were not for the faint of heart. Horror stories of failed implementations costing millions of dollars were fairly common. For many, those perceptions live on.

Some solution providers jump on this bandwagon and try to reposition their solutions as something else without really changing what they actually do. Is SAP’s move a similar tactic? We think not. We believe it is an indication that the leadership of the SAP SMB team has a firm grasp of the needs of these smaller enterprises and is committed to satisfying those needs.

Over the years, SMBs in general have been turned off by ERP, thinking of it as a huge, disruptive and expensive undertaking. SAP in particular has suffered from these perceptions as a result of its penetration into large, multi-national enterprises. Overlooking the fact that SAP sells a completely different solution to SMBs, many mistakenly believe all ERP implementations to be overwhelmingly complex and overkill for their smaller operations. They fall into the trap of thinking they can get by without it. Or they think they need “something else.” In reality, based on the way Mint Jutras defines ERP, they not only need it, they need ERP and more. We believe this is the rationale behind SAP’s platform approach.

Some of the problems with the early versions of ERP resulted from software vendors trying to be all things to all businesses. With few exceptions, most early solution providers cast a wide net. Unwilling to turn any potential business away without a try, they came to market with very broad solutions. By trying to please everyone, they never had a complete solution for anyone. The 80-20 rule prevailed. Nobody expected a solution to satisfy all their needs (an 80% fit was often the goal), resulting in invasive (and sometimes expensive) customizations that built barriers to further innovation.

SAP seems to agree with our conclusion: All businesses need some flavor of ERP. But a “one size fits all” solution is not the most effective approach, because of the fact they also need “more”. But the “more” needed by a brewery is very different from the “more” needed by the company providing field services to the oil and gas industry, or the fitness club selling gym memberships. Even in food and beverage, the “more” needed by growers is very different than the “more” needed in the poultry industry.

And while brewers, growers, field service providers, fitness clubs and poultry providers all have similar needs in finance, accounting, booking and revenue and inventory management, they are not willing to spend a lot on these back office functions, preferring instead to invest in solutions that help them directly grow their businesses. These companies want to invest in a gym club solution, or a beer brewing solution, or a field service solution, not a generic ERP.

But wouldn’t it be nice if you could satisfy all your needs, including those basic functions, with the specialized solutions that help you directly drive your business? You can if those specialized solutions are built on top of a strong foundation – an ERP platform. That is the plan for SAP Business One.

SAP will continue to invest (and invest heavily) in the ongoing development of the generic core ERP, including new features and functions, as well as the user experience. It will modernize the user interface, including access from mobile devices, and embed analytical capabilities. But perhaps equally, if not more importantly, it will invest in the underlying architecture and technologies that enable partners to more easily enhance and extend the solution for the specific needs of different vertical, and in some cases even more specialized micro vertical industries.

Click here to read the full report on SAP’s plans and Mint Jutras’ analysis please click on the link below (no registration required).

 

 

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What are you running your business with? Is it ERP?

Perhaps you’ve heard me ask the question, “Is it ERP?” about various solutions on the market. Maybe you were thinking, “Does it matter?” The answer to that question is, “Yes and no.” “No,” in that ERP, like any software category, is just that. It’s a category, a label and you shouldn’t read too much into that. “Yes,” in that the category is often misused and maligned.

While the acronym itself (short for enterprise resource planning) can be somewhat misleading, I have always been very clear on my definition of ERP:

ERP is an integrated suite of modules that form the operational and transactional system of record of the business.

The rest of the world doesn’t see it quite this clearly. Of course my definition is intentionally quite broad, but it needs to be simply because the operational and transactional needs will vary quite significantly depending on the very nature of the business. You can’t run a service business like a manufacturing or distribution business. Retailers, government and non-profits all have their own unique requirements.

This situation is also clearly exasperated by the fact that the footprint of ERP has grown to the point where it is getting more and more difficult to determine where ERP ends and other applications begin. Functions like performance management, talent and human capital management, etc, that used to sit squarely outside of ERP, today might sit either inside or outside that boundary. While operational accounting has long been a core competency of ERP, more robust financial management can be an integral part of ERP, or a stand-alone solution. Likewise, the footprint of solutions that have traditionally been marketed as financial and accounting solutions have expanded as well. No wonder there is so much confusion out there.

As a result, I thought it would be a good idea this year to see what people actually think they are using to run their businesses. While I have been conducting an annual ERP survey since 2006, much of the data I collect is relevant to other solution providers as well, particularly those that focus primarily on finance and accounting, with perhaps some project management and/or human resource management included. So this year I changed the name of the study to the Mint Jutras Enterprise Solution Study and added a new question at the very beginning.

Question: Which of the following best describes the software you use to manage your business?

  • Primarily enterprise level finance and accounting solutions (might include project management and/or human capital management)
  • Integrated enterprise level finance and accounting solutions supplemented with other operational applications (e.g. inventory, warehouse management, etc.)
  • An integrated suite of modules that provides a full system of record of our business (often referred to as ERP)
  • Desktop solutions such as Quicken, QuickBooks, Peachtree, etc.
  • Mostly spreadsheets and/or some low-cost or free tools (Google apps, Zoho, etc.)
  • Don’t Know

While data collection is still underway, we have collected almost 300 responses thus far and the results are quite interesting.

Note that participants checking spreadsheets and “Don’t Know” were disqualified and therefore will not be represented in any results. While those running desktop solutions qualified, only 1 participant checked this option and therefore I will only include the first three listed above in our discussion here.

During the course of the survey, participants are asked to check off all the different accounting/ERP solutions they have implemented across their entire enterprises and then asked to select one of those and answer implementation and performance questions for that specific solution. While 84% of the participants selected a solution that is clearly marketed as ERP, only 33% of this segment selected the third option above, which is reflective of the Mint Jutras definition of ERP. So they have purchased an ERP solution, but by my definition, they aren’t running ERP.

The remaining 16% selected solutions that are generally marketed as finance and accounting solutions. And yet 21% of these participants described the solution they were running as an integrated suite that provides a complete system of record of their business (i.e. ERP). So it would appear the majority of those running full ERP solutions are not making the most of what they have. And at least one in five of those running solutions primarily marketed as accounting solutions seem to have all they need to run their businesses. The full breakdown of responses is summarized in Figure 1.

Figure 1: What runs your business?

Figure 1 Blog postSource: 2015 Mint Jutras Enterprise Solution Study

These (somewhat surprising) results caused me to dive a little deeper, looking for, if not an explanation, at least a pattern. This early sample represented a pretty diverse group with the largest representation from manufacturing (41%) and service related businesses (36%). Given ERP evolved from MRP (material requirements planning), one would expect a higher adoption rate and more mature ERP implementations in manufacturers. While very few manufacturers run the solutions marketed primarily as finance and accounting solutions, 41% indicated the software running the business was primarily a finance and accounting solution. Another 26% had integrated finance and accounting solutions supplemented with other operational solutions such as inventory and warehouse management, presumably purchased from another vendor or a partner of their ERP solution provider. Again, only 33% described their implementation as full ERP. So no, manufacturers are not ahead of the pack.

I also looked at individual solution providers where I had a sample of at least 20 responses for smaller vendors or 40+ for larger ones. What segments were most likely to be running an integrated suite that provides a full system of record? The answer: Those running solutions that specifically target small to mid-size businesses. Does this mean small and mid-size businesses were more likely to describe what they were running as ERP? Not necessarily. It depends a lot on the solution provider and the solution itself.

Sixty-eight percent (68%) of those running Aptean’s solutions and 67% of those running SAP Business One described what they were running as ERP, per the definition above. Those running Acumatica’s cloud-based solution were also more likely to do so at 55%. And yet those running any of the four Microsoft Dynamics ERP solutions (AX, NAV, GP, SL), all of which target small to midsize enterprises (SMEs), were less likely, with only 28% indicating they were running a full ERP. Instead, they were more likely to report running integrated enterprise level finance and accounting solutions supplemented with other operational applications. My guess is that the partners that sold them the Dynamics solution (note: all Dynamics solutions are sold exclusively through partners) provide these other operational applications. Yet clearly these add-on’s are not so fully embedded and seamlessly integrated that they appear to simply be part of the ERP solution.

This is in stark contrast to solutions sold by Intacct partners, where I have noted previously that it is nearly impossible to distinguish where Intacct ends and the partner solution begins. As a result, 23% of Intacct customers indicated they were running an integrated suite that provides a full system of record, even though Intacct doesn’t portray its solution as ERP. It is one of those financial and accounting solution providers.

Another factor at play here is the whole concept of 2-tier ERP implementations. A full 85% of our survey respondents operate in more than one location and 69% are multi-national enterprises. This lends itself to the scenario where each operating location (division, subsidiary, business unit, etc.) may be run as a business all on its own. In fact if these units are in different countries they are also separate legal entities, requiring their own P&Ls. So you might have one system running at corporate headquarters (HQ) and other systems running the divisions.

The requirements at corporate HQ are largely financial, particularly if all orders are placed and fulfilled at the divisional level. This contributes to a larger percentage of respondents only running financials.

In days gone by these operating units might have been left to their own devices to find a solution to help them run their individual operations. Those days are long gone though. Today, 96% of our survey participants with multiple locations have established corporate standards and 64% of the time these are multi-tier standards, meaning a different ERP is used at the divisional level than at corporate. But even with a corporate financial solution in place, divisions still need some sort of finance and accounting in order to roll up to corporate. You can push the corporate financials down to the divisional level and then supplement them with other operational solutions. Or you can implement a full ERP at the divisional level and then integrate the divisional ERP with corporate financials.

This alone could be a very good reason why SAP Business One customers are more likely to be running a fully integrated suite. Of course if they are truly a small stand-alone business, they need a complete solution and probably don’t have the budget to be looking for disparate solutions that need to be integrated. Even if they are part of a large corporate enterprise, there is a pretty good chance corporate is running some version of SAP ERP. Because SAP Business One is pre-integrated with SAP ERP, the division has an integrated suite of modules providing a full system of record of the division’s business, that also happens to roll up to corporate financials.

With this as a likely scenario, you might think that the vast majority of SAP ERP customers are simply running integrated financials. They are not. Only 19% reported running primarily enterprise level finance and accounting, while 29% reported running integrated financials and other operational applications and a (relatively) impressive 52% reported running full ERP. Many assume SAP, being the 800-pound gorilla and therefore open to attack, is so complex and hard to implement that many never get beyond the basics of accounting. Yet in comparison to others, it is actually more likely to provide that full system of record.

This is not the case with Oracle, the other giant in the ERP industry. Almost half (46%) of Oracle users participating in the survey characterize their implementations as primarily accounting and only 28% describe them as ERP.

So while I would like to conclude that I found a distinct and recognizable pattern in all this data, the bottom line is that implementations vary quite significantly, particularly in comparing different solution providers. I am excited to have the beginnings of this new and extensive data set and look forward to sharing other insights as we move through the data collection and analysis phases.

Solution providers interested in collecting data from your own installed bases, feel free to contact me directly at cindy@mintjutras.com. There is still time but the window of opportunity will be closing soon!

 

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SAP Leverages the “Power of Big” to Benefit SMEs

Some common myths and misconceptions in the world of ERP are hard to kill, particularly when competitors and pundits just won’t let them die. Among these common myths is the perception that SAP is just for the big guys. Yes, the SAP Business Suite and even some predecessors to the Suite are installed in a large percentage of the Fortune 500. And yes, some of them cost millions of dollars and took many years to implement. Of course there are some horror stories, but I would argue those exist for any major ERP vendor.

I have to admit, during my 30+ years of working for software companies (but never for SAP), I might have encouraged some of those misconceptions, just as SAP’s competitors do today. But now, as a recovering software executive turned data junkie, I tend to look beyond the rumors and misperceptions. I go for the facts. Here are a few that are hard to argue with:

  • SAP has about 263,000 customers
  • 80% of them fall in the small to mid-size (SME) bracket. Do the math. The answer is 210,400.
  • SAP does not sell just one product. There is the Business Suite, but also SAP Business One and SAP Business ByDesign (no it is not dead or dying). SAP Business All-in-One is the Business Suite repackaged, by industry, for medium size businesses. You might choose to call it a different product or not, but it really matters little. Repackaged with best practices included, it makes the Business Suite more attractive to smaller (but not too small) companies.
  • SAP Business One, which addresses the lower end of the SME market, is installed in over 45,000 small businesses.
  • SAP’s ecosystem of partners that support small to mid-size businesses is 700 strong and growing.

I am sure one of SAP’s goals for this year’s annual SAP SME Summit was (once again) to help dispel these myths and misconceptions. I am equally sure that SAP understands it will take more than just bringing together customers, press and analysts in its hip New York City office to counter these perceptions. Instead, it seems to be effectively leveraging its extensive resources in order to help small and medium size businesses. Here are a few of different actions it has taken recently:

  • SAP HANA 9 can now be run on less expensive hardware
  • Powerful data visualization tools are available with a copy of SAP Lumira, free to any SAP customer
  • Fiori apps, providing an intuitive and modern new user experience, are now included for free (with paid maintenance) with SAP Business All-in-One
  • A 0% financing program, designed specifically for small businesses, as well as SAP’s partners that sell directly to them. This is a “buy now, pay later” option that gives the small business free financing for 24 months, while the partner gets paid within 5 days.
  • A free connection to the Ariba Network, which connects over 1.6 million companies in 190 countries, allows the small business to list its products. Although the free version does not allow bidding and purchase from the site, this is an effective way for small businesses to reach a large potential group of buyers.

It takes a large company with deep pockets and extensive resources to be able to make these kinds of offers to SMEs. Yes SAP continues to be the 800-pound gorilla in the ERP space but that doesn’t mean it can leverage the “power of big” to the benefit of the little guy.

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Rumors of the Death of SAP Business ByDesign Greatly Exaggerated

I have been hearing rumors about the death of SAP Business ByDesign for several months now. Most of them come to me from SAP competitors, although a few have come through ex-employees. Note the emphasis on “ex.” No employee of SAP has ever confirmed or even hinted at this. However I have to admit the messaging around Business ByDesign has not always been crystal clear, which has allowed for these rumors to spread.

Prior to the SuccessFactors acquisition Business ByDesign was positioned as the platform of choice for development of all cloud offerings. But with the acquisition and the accompanying infusion of “cloud DNA” that story changed. All of a sudden the Business ByDesign platform wasn’t important. The powers that be at the time (SapphireNow May 2012) said,  “Customers don’t care about platforms. They only care about beautiful applications.” We heard less about By Design and more about the benefits of loosely coupled applications over tightly integrated ones. The market interpreted that to mean that Business ByDesign would be broken apart into different bits and pieces and might not survive as an integrated suite. SAP didn’t go out of its way to squash that rumor, so it too spread.

Then came Sapphire Madrid (November 2012) and there was a new platform in town. The HANA cloud platform started showing up on slides with little or no fanfare, and less explanation. The more SAP talked about its cloud strategy, the less we heard about Business ByDesign. Hence more confusion.

Until now

Earlier this week SAP presented a Business ByDesign strategy update to several industry analysts, including yours truly. Most importantly, it positioned Business ByDesign relative to other products in its portfolio. While I often find SAP graphics confusing in that they are too technical and attempt to say too much, I found the graphic shown refreshingly effective.

BBD

But it does assume you know something about SAP products, so let me explain. Business ByDesign is essentially a midmarket product, targeting companies that are smaller than the very large enterprises where the Business Suite is sold, and companies that are bigger than the SMBs which is the intended market for Business One. Business ByDesign shares this space with Business All in One, which sits a little higher. Remember, Business All in One (BAiO) is essentially the same underlying ERP that is a big part of the Business Suite. But BAiO bundles ERP with industry-specific content and best practices to make it a better fit and an easier implementation for those midmarket companies in (many) supported industries – midmarket companies that don’t have quite the deep pockets of the large enterprise.

You’ll notice BAiO also dips down into the Business ByDesign space. Business ByDesign is SaaS; BAiO is not, although SAP does offer some cloud alternatives for the Business Suite and BAiO, which have traditionally been deployed on-premise. But these cloud options are more like a hosting environment than SaaS. This overlap might result because of deployment preference or it might result because industry-specific requirements are not be satisfied with the Business ByDesign suite.

But you will also notice the Business ByDesign block extends upward into the top of the midmarket and also encroaches on the large enterprise space as well. Business ByDesign will be offered as two different packages, under two different names, but with one single code base. Business ByDesign is the complete suite, while SAP Cloud for Financials is a subset, including the finance and accounting piece of ByDesign. Even though it will share a code base, the code base was tweaked so that SAP Cloud for Financials could stand alone, without the other non-accounting “legs” of the solution.

The reasoning behind this split into two packages is to address two different buying patterns. SAP Business ByDesign is intended for “Mid market companies and subsidiaries [that] expect an out-of-the-box ready-to-use suite with open interfaces.” SAP Cloud for Financials (the subset) is for “Large Enterprises [that] expect an open ERP backbone to be complemented with SAP and non-SAP Line of Business applications.” While the Business ByDesign buying pattern is pretty clear, the SAP Cloud for Financials might require a bit more explanation.

Conceptually, these two different approaches aren’t all that different. Few large enterprises today are huge monolithic organizations. Instead they are comprised of operating units, divisions and/or business units. While these units might have some operational autonomy, financials will have to be consolidated at a corporate level. Where these units operate as a separate legal entity, a full ERP solution is most likely needed. While in the past these units may have been left to on their own to select and implement ERP, today, standards are more the norm. The 2013 Mint Jutras ERP Solution Study found 94% of companies (with multiple operating locations) have defined standards for ERP today. What better way to enforce these standards than through a cloud-based SaaS environment?

Where does Business ByDesign fit in this scenario? It fits as an integrated suite at the subsidiary level. A lot of different ERP vendors talk about this two-tier kind of approach. Some even advertise they can integrate with SAP at the corporate level, simply because of SAP’s dominance here. A cloud solution at the subsidiary level has a lot of appeal here because it helps the enterprise assert a level of control while also providing some flexibility and autonomy at the subsidiary level.

But how about if we pull a switch here? What if we start to think that maybe the corporate financials might be due for an update or even a major overhaul? With the siren call of the cloud becoming more and more compelling, why not consider replacing that legacy accounting solution at corporate with a modern, technology-enabled, cloud-based solution? You might not think the financial modules of an ERP designed for a midmarket company have the accounting chops necessary to support a large enterprise. But then most accounting applications designed for the midmarket aren’t built by SAP. In fact, SAP can and has used the same design team for Business ByDesign (and therefore SAP Cloud for Financials) that architected the Business Suite. And at that level SAP has dominated for years.

All told, this one simple graphic speaks volumes about the relative positioning of the SAP products. Is there room in SAP’s strategy for three different products (four if you count BAiO, with its separate go-to-market strategy)? I am not only tempted to say yes, I am tempted to say, “Hell, yes.” Think about it. SAP is the 800 pound gorilla and even 100 pound gorillas can handle a diverse portfolio.

Addressing Concerns

So what about some of the accusations and assumptions that have been floating around the rumor mill? Let’s counter a few of them.

“SAP is pushing Business One in the cloud instead of Business ByDesign.”

ByDesign has two characteristics that define it: it is a midmarket suite and a cloud solution that is deployed exclusively as software as a service (SaaS). It was never intended to replace SAP Business One at the low end of the market, but when a small company wanted SaaS ERP, it was the only product SAP had to sell. Now that a “cloud” option exists for Business One, that is no longer the case. This is a clear segmentation of the market by company size. Also, Business One has momentum. With over 40,000 customers and a large and mature channel in place, now that a cloud option is available it is only logical it is starting to gain its own fair share.

“SAP is no longer developing the product.”

SAP has been continuing to develop Business ByDesign, but these efforts might not have been particularly visible over the past couple of years. While SAP Cloud for Financials and Business ByDesign share a common set of code, some effort was involved in order to allow SAP Cloud for Financials to stand alone and yet be easily “coupled” to other solutions. This tends to be “under the covers” work.

And then there is HANA. Business ByDesign pre-dates HANA.  It was built in the NetWeaver era and used MAX DB (database) and TREX (search and classification). In order to take advantage of its advanced technological capabilities, Business ByDesign also had to transition to HANA, resulting in more “behind the scenes” work.

SAP assured those of us on the recent call that it was continuing to invest in the product and the platform. That said, it is also (better) defining the current target market. SAP will focus on developing the ERP backbone and specific capabilities for service industries, while also adding (open) integration capabilities. It will continue the transition to HANA for scale and extensibility. And it will also transition to HTML5 and benefit from the work done on the Fiori applications for a responsive, mobile-first user interface.

“Business ByDesign is a technological dead end. It is based on Microsoft Silverlight.”

See answer above.

“SAP themselves view it as a failure; otherwise it would be available world wide. Instead it is only available in a few countries.”

Twenty four percent (24%) of Business ByDesign business has been in the US and 32% in Germany. But it is available in 15 different countries. Is it concentrating its attention on all 15? No, but then not all 15 of them have really strong economies today. The SAP installed base is a prime market for Business ByDesign so SAP is going where it has the most customers and can make the biggest bang for its buck. That only makes good business sense.

Three more countries are planned for 2013 (New Zealand, Japan and South Africa) and an additional 3 are planned in 2014 (Brazil, Belgium and Singapore).  In addition customers are running customer-specific localizations in another 31 countries.  How many countries does it need to be in?

Summary

The supposed death of Business ByDesign seems to just wishful thinking on the part of some competitors. Although I also observe other SaaS ERP companies welcoming SAP onto their turf, as much for validation as for healthy competition. Let’s face it, all other ERP companies love to single out those competitive deals where they have beaten SAP.

Instead of a death knell, I am seeing renewed focus and commitment across SAP at the board, and executive level, as well as in the field. This represents a commitment to the cloud strategy in general and Business ByDesign specifically. Now, more than ever, SAP is clear about its target for the product:

  • The SAP installed base and upper mid-market are key for the Business ByDesign suite. Customers with higher revenue and user count threshold are prime targets as well as subsidiaries of large enterprises.
  • Large enterprises will be the target for packages such as SAP Cloud for Financials and other line of business cloud solutions like SAP Cloud for Customers and SAP Cloud for Sales. SAP will stress integration capabilities with SAP and non-SAP cloud / on premise systems.
  • Its primary industry focus will be professional services, public services and distribution.
  • While the product is available in other countries, SAP will focus its sales efforts where it has its largest installed base and where economic indicators signal a strong market. As a result, go to market efforts will focus on the US, Germany, the UK, Netherlands, Canada and Australia.
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JAR SYSTEMS: Poised for The Future With SAP Business One

If your small to medium size business (SMB) grew out of advances in technology, you would think you would naturally turn to technology to  help you manage and grow that business. Unfortunately when it comes to investing in Enterprise Resource Planning (ERP) to support growth and provide control, many SMBs are like the proverbially shoemaker: The shoemaker’s children have no shoes.

JAR Systems could have easily found itself in this type of situation. Founded in 2004, JAR Systems provides “mobile solutions for education and training” in the form of carts to store, secure and most importantly, charge mobile devices. But instead of struggling along with something less than a true enterprise-class solution, as so many SMBs do, JAR Systems viewed the cost of ERP not in terms of the cost of the software, but instead in the potential for missed opportunities. JAR Systems chose to take control of its business in 2011 with SAP Business One and hasn’t looked back since.

Seizing An Opportunity

No modern classroom today would be complete without its share of electronic devices. These devices come in a variety of shapes, sizes and capabilities and include full-size laptops, notebooks and tablets. All have steadily been making their way into classrooms for more than a decade now. With the emergence of these new technologies, schools face new challenges in managing devices and maximizing their availability. How will schools keep the software on devices fresh and refreshed? How will they make sure the batteries are fully charged? How will they store and secure them when they are not in use? These are all quite basic issues, but if not adequately addressed can seriously reduce the effectiveness of these devices as learning tools. And let’s face it: These learning tools don’t come cheap.

In 2004 JAR Systems seized the opportunity these challenges created and began offering carts that offer more than storage; they can be used for device management and “intelligent charging.” Device management can be scheduled and performed automatically at night while the devices are being charged. With intelligent charging:

  • Power sensors evaluate demand from mobile device adapters
  • Charging logic determines when and where power should be distributed automatically
  • Devices recharge in the quickest, most energy-efficient way possible

As a result of intelligent charging, schools save money (in energy bills) and maximize the time the devices are available for use. JAR Systems sells almost exclusively through partners and in 2011 it was at a crossroad of growth.

Taking a Step Back

Like many SMBs JAR Systems had invested first in a tool that would help them manage its pipeline, choosing Salesforce.com. This was hardly unusual in two ways. First, startups often worry more about where that next big order is coming from than about having a back office system to put it in once it is closed. Second the “software as a service” cloud delivery mechanism is appealing for those that have yet to invest in hardware and Information Technology (IT) infrastructure.

Salesforce.com is often referred to as a customer relationship management (CRM) solution, and indeed Axel Zimmermann, President of JAR Systems referred to it as such. JAR Systems was in fact using it as a window into forecast of demand. But while Salesforce does indeed manage contacts, sales activity and opportunities, it doesn’t extend very far into the relationship with the customer after the sale is made. As a result, it is very easy to throw a lot of data into the system, but it doesn’t require the same level of organization and discipline ERP requires.

Also, in JAR’s case, the forecasted orders were coming from partners, with several of them potentially competing for the same account. The result was a distorted view and an inflated forecast. And the company still didn’t have a good handle on the business.

So when JAR Systems decided to move forward with SAP Business One as its ERP, it also decided to step back from Salesforce.com and use the CRM solution that is embedded within SAP Business One. Not only did that give them a deeper reach into the relationship with the customer, it also tied everything neatly together.

Flexible Control

While a stand-alone application like Salesforce.com provides a great deal of flexibility in how data is structured and processes are defined, it doesn’t force structure and organization. It doesn’t need to. Some might refer to it as a system of record of prospect and customer engagement, but it does not maintain a system of record of transactions and therefore doesn’t require transactional integrity be maintained.

Because it is so flexible and the next order is of course the lifeblood of the company, many are tempted to throw everything but the kitchen sink into the system and that is exactly where JAR Systems found itself: With lots of data, but little data that was actually useful in terms of decision-making… and no transactional integrity.

A single solution combining ERP and CRM was the answer. Yes, it was a bit of a step backward to start over with CRM. But it also gave the company the opportunity to reorganize the data and add a level of control. This was especially important since all products are serialized, which adds another level of integrity that needed to be preserved, something you simply can’t accomplish with a stand-alone CRM solution.

It Takes a Village

This move to an integrated SAP Business One solution was not one to be taken lightly. And it was not something JAR Systems felt comfortable in tackling all by itself. All told there were four important parties involved:

MCS Business Technology is an independent, employee-owned consulting firm that partners with SAP in delivering SAP Business One and complementary services. JAR Systems turned to MCS for help with their implementation.  MCS Business Technology in turn partners with Boyum IT, also an SAP partner that is authorized to develop add-ons to Business One. One of the add-on modules is used by JAR Systems to tailor and customize the screens of Business One. One of the compelling factors for the particular add on is that it is certified by SAP and comes already integrated with Business One.

The third constituent was SAP itself. Two aspects were key, according to Mr. Zimmermann, “The technology world is changing so rapidly, we wanted to be assured that we could keep up. So far, upgrades have been painless. Business One is easier to update than my Windows machine.“ JAR recently upgraded to the latest release of Business One (9.0).

Mr. Zimmermann added, “Secondly, we looked long and hard at the roadmap while we were evaluating our options. We are looking for fast response time. We want to be able to ask questions that we can’t answer right now. We see the most immediate potential value in Business One, analytics powered by HANA. It is inspiring to hear the message and see the examples of what it can do. Of course we will buy Business One, powered by HANA later, as long as we can afford it. We want to use IT to revolutionize this business in ways previously not possible.”

For more information on these two different versions of Business One and HANA combined, see Making Sense Of SAP Business One With SAP HANA.

And last, but certainly not least, was JAR Systems itself.

JAR Systems had the insight and the vision to see that a small step backwards would yield a giant step forward over time. It’s ability to recognize the cost of lost opportunity as far more expensive than the cost of new software was both visionary and practical. There is no doubt that new technology will continue to bring about change in mobile solutions for education and training. While others might be apprehensive about the future, JAR Systems is poised to capitalize on that change to better serve its customers, while also comfortably positioned to leverage technology for its own business.

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With SAP HANA, will “Big Data” cease to exist?

I know that sounds like a strange question, particularly with all the hype today about big data. We’ve all been watching the volume of data grow and grow and grow. I’m sure you’ve heard as many statistics as I have thrown about. We’ve progressed from talking about gigabytes to terabytes to petabytes. So why do I think it might be going away?

Last Friday I attended one of SAP’s Startup Forums in the Boston area.  Dr. Sam Madden, who runs MIT’s CSAIL (Computer Science Artificial Intelligence Lab) presented the keynote for the event. While most might think the concept of big data is self-explanatory, Dr. Madden actually defined it as follows: Big data is data that is too big, too fast or too hard for existing systems and algorithms to handle. Big data, by Dr. Madden’s definition, might eventually go away. Not because there is less of it, but because we are better equipped to handle it.

SAP is certainly trying very hard to make this happen and its Startup Forums are manifestations of this effort. While this is the first of its kind in the Boston area, SAP has been holding these around the world for a while now. The format is interesting. Think of it as speed dating between really bright technologists and potential investors (including SAP Ventures and its $155 million venture fund). Picture 15 different startups in a room, each with five minutes to give their pitch on who they are and why their ideas are the next best things in the world of big data.

Why is this a match made in heaven for these guys (and yes, sorry, but every single one of them was male)? Because these brilliant minds come up with truly creative ideas and often need funding to get them (and their products and services) off the ground. SAP is looking for promising startups interested in developing solutions on top of the HANA platform. SAP doesn’t ask for money, code or intellectual property (IP).  It provides an SAP HANA test environment and development licenses, a development boot camp and technical support at no charge until the startup runs live on HANA. At the point when HANA is embedded in a product, SAP will begin to see some revenue.

Of the 15 presenting, some were already participating in the program; others were potential participants. Some made the HANA connection in their pitches; some did not. Dr. Madden suggested (and a panel of partners from technology investment companies from the area agreed), “Big data is over-hyped. It is a new name for something we have been doing for the last five years.” But he also acknowledged awareness of and access to new data as a result of the convergence of some major trends. We have the digitization of data. We’re collecting more because of the emergence of inexpensive sensors, access to cheap computing and storage and an increasingly connected world.

While it might be over-hyped, big data is not going away any time soon. There is still plenty of opportunity based on current solutions’ inability to handle the volume of data that already exists and is emerging from these trends. That’s probably a good thing for SAP and other vendors jumping on the in-memory and big data bandwagon. Right now SAP HANA’s value proposition needs big data. But do customers and prospects see that? And do they see HANA as the solution?

It is clear that those bright technologists presenting their ideas recognize this opportunity and HANA’s potential. As do the 170 live customers of HANA and the other 40-50 that have HANA projects underway. But this is still a very small sample of the 232,000 SAP customers worldwide, 80% of which are small to medium size enterprises (SMEs). Does the typical SAP customer (or prospect) understand what HANA can do for them? The answer isn’t just, “No.” The real answer is, “Hell no!”

SAP’s single biggest challenge in bringing HANA to market is not in developing the technology, but in describing it in a way that helps average business people understand what it can do for them. So far SAP has largely described it as an elegant technical solution in search of a problem. It also suffers from having initially described HANA as an in memory alternative to a traditional database. Dennis Howlett has summed it up the best of any I have seen so far in saying,

HANA is much more than that. While it might have started out as a poorly thought out (Oracle competitive) database play, it is a development environment that is providing ISVs with extraordinary opportunities to rethink business processes as well as providing the real time platform for both analytics and the transactional systems.”

But the average enterprise, particular an SME isn’t looking for a development environment.  This explains why HANA has been most successful in large enterprises where you have large IT staffs with big budgets and lots of problems to solve. But that is not how the vast majority of businesses spend their budgets, particularly SMEs. They are looking for a solution to a problem, but they don’t want to develop a solution.

The typical SME won’t develop a HANA solution. It will seek a solution developed on HANA. This is why the SAP Startup Forum is so important- to provide solutions to all those potential problems. Lots of problems, across lots of industries will require lots of solutions.

In the meantime SAP is also making its ERP solutions available on HANA thereby providing some important differentiation in a market where in some ways traditional ERP has become viewed as a commodity. But HANA will not differentiate SAP’s ERP solutions until or unless business leaders understand what HANA can do for them. ERP will run faster, but unless speed is a barrier to doing business, the business won’t pay much (if anything) to make it faster.

Businesses won’t pay to make life in general better. But they will pay to solve a particular problem or overcome a particular challenge. The challenge SAP faces is first in helping those business leaders identify those problems and secondly to convince them the problem is indeed solvable.

For those of you in my generation, think back to the phone you had in your childhood. For me it was a rotary-dial, three party line. Our biggest problem was calling a neighbor who shared our party line. If you had told us we could have a phone that would allow us to snap a picture and instantly send it to someone, not across town, but halfway around the world, we wouldn’t necessarily have jumped at the chance. First of all, we probably wouldn’t have believed you. Secondly, we wouldn’t have perceived the need to do it.  We just didn’t think like that.

It took us many years and many generations of technology to get from that rotary dial three party line to today’s smart phones and networks, with all the inherent capabilities. Something tells me it won’t take us 50 years before business leaders start demanding what HANA has to offer, but we’re not there yet. In the meantime, it is safe to say big data is here to stay.

 

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Is SAP’s Cloud Strategy Like the Blind Men and the Elephant?

As I watched a Twitter conversation recently discussing SAP’s cloud strategy, I was reminded of the old story of the blind men and the elephant. While there are different versions, the upshot of the story is that each blind man “sees” something different because each is only touching one part of the elephant. Without sharing their experiences and collaborating nobody gets the full picture.

Doug Henschen, executive editor of InformationWeek, sparked the discussion with his article SAP Clings To A Dated Cloud Apps Strategy. Doug writes, “As cloud vendors Salesforce.com, NetSuite and Workday look toward larger companies, SAP courts small and midsize firms.” Doug was at the same event I attended last week, SAP’s SME Summit. So yes, the message being delivered by SAP at this event was one targeting SMEs (small to mid-size enterprises). His article mentions both SAP Business One which is available through on-premise and Software as a Service (SaaS) deployment models and SAP Business ByDesign, an exclusively SaaS offering.

However, two weeks prior to that, I also attended SapphireNow in Madrid. In a cloud strategy session there, I heard SAP Financials OnDemand, which is a derivative of SAP Business ByDesign and therefore an important element of SAP’s cloud strategy, was targeting medium to large enterprises. Does this mean the folks at SAP are not collaborating and instead are giving different and conflicting messages? I don’t think so. I think it means the same product can serve different markets and can be presented differently to different audiences.

Second question: Does this mean the target for SAP is different than the target for the likes of Workday, Salesforce.com and NetSuite? Not necessarily. Some will argue that the “large enterprise” play for Financials OnDemand is limited to subsidiaries of large enterprises.  First of all, this a similar message conveyed by many solution providers citing “2 tier ERP strategies.” But often that is the very definition of a large enterprise: a collection of smaller business units or subsidiaries. Not only do these subsidiaries roll up to corporate financials, they often must deal with the same complexities as their corporate parents.  Some deal with those issues better than others.

So in many ways, all these solution providers are attacking the same market. SAP is just coming at it from a different direction. While the solution providers noted (all of which started out as SaaS vendors targeting small and/or midsize enterprises) have been coming up-market, SAP has been moving in the opposite direction.  SAP is best known for its presence in the largest of large enterprises and nobody would argue that market is quite saturated. Real growth potential lies in the small to midmarket space. Whether one direction is any easier or more difficult than the other, the challenges are definitely different.

In coming up market, these pure SaaS vendors need to add features and functions required by large multi-national enterprises. In coming down market, SAP needs to eliminate a combination of real and perceived complexity. Indeed back in 2007 SAP admitted it started by building Business ByDesign from scratch primarily to reduce that complexity.  And yet as smaller and smaller companies began operating globally, the complexities associated with multiple currencies, multiple languages, multiple legal entities, increased regulatory compliance requirements and global trade needed to be addressed even in smaller companies. The upstarts had the advantage of simpler solutions to build upon and SAP had the advantage of design teams that had been routinely addressing those needs for many years, particularly in terms of finance and accounting.

In his article, Doug even mentions that, “…CEO Aneel Bhusri said Workday’s Human Capital Management apps are already capable of handling the largest companies in the world, like Hewlett-Packard and DuPont, both of which recently signed enterprisewide deals with the company. Workday’s financial apps are currently suitable for use by midsized companies, Bhusri said, but by the end of next year — after investments in cloud capacity and app resiliency to sustain high-scale transaction processing — they’ll be ready for Fortune 1,000- or even Fortune 500-sized companies.“

That’s the market where SAP made its name and asserted its dominance.

But in determining strategy, here’s the big question: What will move to the cloud and what will remain on-premise (and is SAP’s strategy well aligned to that)? Many seem to think everything will steadily progress towards cloud-based and SaaS solutions, eventually replacing all on-premise solutions. I think it will take a very long time to get there. My latest survey on “Understanding SaaS” indicates that about 17% of business applications used today are SaaS-based and in 5 to 10 years that percentage will (just about) double, with 33% projected to be operating in a SaaS deployment model.

Is that because there is reluctance to accepting the SaaS model? No. It is because there are so many on-premise solutions that would have to be replaced. ERP and accounting solutions running large enterprises today might in fact be the least likely of these to be replaced, simply because of the cost and effort expended in initially getting them implemented. While that cost and effort has steadily decreased over the past 10 years, that doesn’t change the fact that these large enterprises spent a whole lot of time and money getting them up and running and the prospect of going through that again is not too appealing.

Yet installing a new cloud-based solution for a business unit or a subsidiary that is not currently fully supported by the corporate solution may indeed be very appealing. For a large enterprise with an existing SAP solution, Financials OnDemand or even the entire Business ByDesign solution may be a very good option for a subsidiary, business unit or remote operating location. Once a large enterprise has done this one or more times and the cloud-based solutions are feeding the corporate solution, perhaps it will pave the way for a transition to a 100% cloud solution in the future. If so, which cloud based solution do you think might make the transition the easiest? Do you think SAP might have thought of this too?

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Making Sense of SAP Business One with SAP HANA. Why Two Versions?

HANA, SAP’s in-memory computing engine has factored into SAP conversations for a couple of years now. Often HANA and in-memory computing are associated with “big data”, and hence associated with big companies. So the introduction of a HANA product for SAP Business One, SAP’s Enterprise Resource Planning (ERP) solution for small to midsize enterprises (SMEs) might not resonate immediately. And yet SAP has  not one, but two Business One products for SAP HANA:

  • SAP Business One Analytics, powered by SAP HANA
  • SAP Business One, version for SAP HANA

Given 79% of its customers are SMEs, SAP must know this segment of the ERP market, particularly the lower end, which is the target market for Business One, does not buy or implement technology for technology’s sake. There must be a perceived business value. Read on to discover when, why and how either or both of these offerings can bring value to the small business running Business One.

What are These Two Versions?

SAP Business One Analytics powered by SAP HANA is currently available while SAP Business One version for SAP HANA is still on the (future) horizon.

SAP Business One Analytics powered by SAP HANA

Back in June, SAP Business One Analytics powered by SAP HANA was in what SAP calls its “ramp up” phase.  This phase sits between the beta version and generally available (GA). During this stage, the software is delivered to a limited number of customers. Once a significant number of those customers have gone live, the product exits ramp up and becomes generally available. Currently there are 24 live customers, with 20 additional implementations underway. SAP originally expected the product to become GA in the fourth quarter of 2012 but ramp up went exceptionally well and GA actually occurred in July.

Analytics for SAP Business One includes predefined content (reports and dashboards) and provides interactive analysis based on an online analytical processing (OLAP) data model (also predefined). You can also create your own ad hoc reports using Crystal Reports. Enterprise search is also provided, allowing structured and unstructured free text search. Think of it as a Google search that crosses the boundary between your enterprise applications and the public domain of the Internet.

Customers running SAP Business One Analytics powered by SAP HANA continue to run the (transactional) ERP solution on their existing Windows servers using the Microsoft SQL database. The Analytics will run on a separate appliance, a Linux-based server where the SAP HANA database will also reside. Pricing will vary based on the actual configuration of the hardware and SAP does have a special pricing model for the SAP SME HANA products, but there will be an investment required. But before you assume that level of investment is out of your reach, talk with the SAP Business One partner that supports you. SAP has gone to great lengths to keep the price tag within reach for the SME.

SAP Business One version for SAP HANA

The second product, which went into ramp up in late September 2012, is SAP Business One, version for SAP HANA. A beta version was demonstrated during SAPPHIRENOW in Orlando on May 16, 2012, also demonstrating that SAP HANA is not just for the big guys. It is expected to be generally available late 2013. Think of this as SAP Business One with “HANA inside.”

This version will allow both the transactional and analytical processing to be run on the same server, both of which will be super-charged for speed.  While normally associated with “big data,” HANA is as much about speed as it is big data. And with speed, it is normal to add more and more data, reaching beyond that which is normally stored in enterprise applications. Think about the enormous potential of useful but unstructured data that is floating out there via the Internet.

While generally a database is optimized either for transaction processing (e.g. ERP) or analytics, can one solution be optimized for both? SAP says, “Yes, with SAP HANA.” However, even though both will run on one box, SAP Business One version for SAP HANA will not run on the box that customers run SAP Business One on today. So again, there will be some investment required; explore those costs with SAP and its partners. If you feel this would be a path you might take, there is no reason to delay your purchase of the Analytics powered by SAP HANA. You can take full advantage of the speed and functionality available today with SAP’s assurance that your investment will be protected.

Those that are satisfied with performance today or cannot justify the expenditure and transition to SAP Business One version for SAP HANA may choose to continue running SAP Business One on MSSQL. They will still have the option of purchasing the Analytics powered by HANA on a separate appliance.

Case in Point: Nashua Communications (Pty) Ltd

Nashua Communications is a good example of an SAP Business One customer that has been and will continue to evaluate different options presented by SAP. As a leading provider of converged enterprise network and communications solutions, the company is based in South Africa. It specializes in the design, implementation and support of converged networking and security solutions that use open, standards-based architecture to unify communications and business applications for a seamless collaboration experience. Nashua Communications is running live on SAP Business One Analytics powered by SAP HANA.

The company has a long history with SAP. Up until a few years ago it was part of Siemens and its global enterprise communication arm (Siemens Enterprise Communications PTY).  As part of the Siemens family, it had been using SAP R/3 for the prior 15 years. This changed when Siemens divested this group and it became part of the Nashua Group (within the Reunert Ltd Company).

According to Darren de Vries, Nashua Communication’s Chief Information Officer (CIO), “During our 15 years on SAP R/3 we had accumulated a lot of IP [intellectual property] around reporting. When we migrated to SAP Business One, this was one of our biggest challenges – 15 years of custom-written reports and queries were no longer there. The challenge had not so much to do with functionality – we had all we needed with some customization to SAP Business One and add-on software, but the standard SAP Business One reporting just couldn’t replace 15 years’ worth of time, effort and knowledge.

“In response to the challenge, we purchased the Business Objects (BOBJ) Business Intelligence (BI) tool and started implementing it. We were working with a South African partner of SAP’s that had BOBJ skills but not in conjunction with SAP Business One, so we found the project not the easiest; and progress was slower than expected.”

At this point SAP approached them directly about SAP HANA. “HANA was all about speed, in memory. But what appealed to us the most was that we could buy it off the shelf to work with SAP Business One right away. It was a no- brainer to our CFO. He said, ‘I want this. Go ahead.’”

When Nashua Communications signed on with SAP HANA it was still in the ramp-up phase and therefore the company was instrumental in identifying some problems, but these were resolved. Most had to do with the customizations and add-on functionality it had added to SAP Business One. This was a thorough test since Nashua Communications puts the solution through more paces than the typical SAP Business One customer. At the 300 user mark, if not the largest, it is at least one of the largest SAP Business One customers.

Because of the “newness” of the solution both to the market and to the company, Nashua Communication chose to roll it out first to a selected group of about 10 power users. Mr. de Vries goes on to say, “We are running now on a live environment and once we resolve the odd little glitch here and there, we are very keen to roll it out to the entire user base. We see enormous potential in terms of enterprise searching, speed and access to real-time data. We will empower each and every user as much as possible, but will keep report and query writing to a more technology literate group of people.”

So what about taking the next step to SAP Business One version for SAP HANA when it becomes available? Mr. de Vries states, “We see value in taking transactions to SAP HANA; performance is like night and day. If there is a cost to upgrade, we would have to come up with a business case to justify, just as we have done for the analytics side.

“For the Analytics powered by SAP HANA, the basis for cost justification was our fairly complex needs in terms of data and reporting. Quite frankly, we had struggled to get Business Objects up and running on Business One. The improved speed we experienced was a major factor. Equally important was access to live data rather than data that was 12 to 24 hours old.

“We also experienced a benefit that is quite unique to the South African market. Unlike the US where good telecommunication service is expected and people talk (rather loudly) about bad service, it is just the opposite in South Africa. Expectations are lower and people sing praises when good service exceeds expectations. We are hoping this access to live information will give us a competitive advantage to provide excellence in products and service.”

Key TakeAways

It is clear that a key value proposition for SAP HANA is speed, and even small to midsize enterprises can be faced with a growing challenge of making sense from and managing more and more data. Whether you consider this “big data” or not, the ability to apply analytics in real time without bogging down the transactional system of record can lead to a competitive advantage.

If you are an SME running SAP Business One now, or considering transitioning to this solution, don’t overlook the added strength of analytics powered by SAP HANA today. The enterprise search capabilities alone may suffice to justify making the transition. As SAP Business One version for SAP HANA becomes available later this year, this version, together with speed and the ability to better handle the growing data challenge should be a no-brainer for those just starting out. Existing customers will need to carefully review the business case for making the transition. For these customers, don’t assume SME means small data and don’t overlook the need for speed.

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Shedding More Light on SAP’s Cloud Strategy

Last week I visited SAP’s US headquarters in Newtown Square, PA for an analyst event. During that event Sven Denecken delivered an update on SAP’s cloud strategy. Sven is SVP of Cloud Strategy and Head of Co-Innovation. While he reports to Lars Dalgaard, former SuccessFactors CEO and now SAP Executive Board Member in charge of all that is “cloud” at SAP today, Sven comes from SAP proper (i.e. not from SuccessFactors) and knows the ERP game quite well. As you might recall from my previous post from May, I walked away from SapphireNow with questions and concerns about SAP’s cloud strategy and feared that perhaps SAP had sacrificed its ERP DNA for cloud DNA. After speaking with Sven, I feel better, even though the story hasn’t really changed all that much.

To summarize Sven’s presentation, cloud is not only hype, but a reality at SAP. The goal is to bring the next generation of cloud applications to market. Next gen means a consumer-like user experience, with “mobile first” development, rapid innovation cycles and customer co-innovation to support greater business flexibility and agility. Social collaboration is not viewed as a separate pillar but as an embedded, integral part of the product design. And for added measure, toss in real-time data and content, B2B exchanges and analytics.

In keeping with the Lars party line, Sven also talked about “loosely coupled” solutions. Yet somehow when Sven, an ERP veteran, talked about “loosely coupled” it came across less like breaking ERP apart and more like a portfolio of applications, including ERP, which could be consumed at an individual company’s own pace. This is familiar territory since growing ERP footprints have made it increasingly difficult to determine where ERP ends and other applications begin. These solutions would be connected through open, cloud-based integration. Integration would be tight (perhaps seamless?) for SAP applications but also available to connect to 3rd party cloud solutions as well as existing on-premise solutions.

Perhaps because in the days before Lars, SAP Business By Design had been declared the go-forward platform for cloud development, and the SuccessFactors solutions were obviously not developed on it, the question of platform was raised at SapphireNow. But Lars downplayed it, saying customers don’t care about the platform; they care only about the user experience. And he was setting out to make beautiful products more beautiful. But beauty has to be more than just skin deep and let’s face it: Products developed on different platforms are harder to integrate than those sharing a common platform. And while in a pure cloud environment the customer is shielded from worrying about such things as platforms, it makes the supported environment inherently more complicated.

So while SAP will not be in the business of Infrastructure as a Service (IaaS), and it already clearly plays in the Software as a Service (SaaS) game, it intends to offer a Platform as a Service (PaaS). While now it has multiple platforms, ultimately SAP will have one standard PaaS offering and it will be based on NetWeaver. Admittedly this will take time and acquisitions will continue to make this a challenge over time.  The platform needs to be open since customers have already invested in applications and these need to keep running. This has the potential of adding a huge degree of complexity for SAP, but it wants to “own” these connections in order to offer its customers one hand to shake for applications and platform, with end-to-end security, high availability and disaster recovery.

SAP intends to offer standard integration connecting cloud applications to the Business Suite (on premise), and also offer cloud-based (SaaS) fully integrated suites (ERP) for mid-market customers (with Business ByDesign and Business One).

A couple other points made that might be worth noting… Remember Sven referred to “mobile first“ development, meaning any new development must be able to run on a mobile device right from the get-go. This represents a big change for the development teams. If you initially limit the size of the screen, it forces the design team to simplify and think first about essentials. They can then add the complexities later, if at all.

The other point is hinted at with Sven’s somewhat unusual title. Not only is he SVP of Cloud Strategy, he is also the head of “co-innovation.” Co-innovation refers to the close relationship SAP has developed with its customers, along with the adoption of agile development methodologies. SAP’s promise of rapid innovation cycles and customer co-innovation translates to four releases per year, delivered through true multi-tenancy. That means customers all run on a single, shared instance of the software, and the solution provider decides when it will be upgraded. While some customers balk at this concept, preferring instead to control their own upgrades, in fact if innovation is delivered as optional features, there is little down-side to the forced march forward of a multi-tenant environment and a lot of upside. While the customer may not be entirely ready to adopt new features, the vendor bears most of the burden of the upgrade and innovation is there waiting when the customer is ready.

There are certainly many other facets to SAP’s cloud strategy, but this update was at least enough to lend more clarity to a cloudy solution.

 

 

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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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