sapphirenow

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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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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Is the World Ready for SAP EPM 10.0?

Unified – Comprehensive – Transformational

On May 16, 2011 at SAPPHIRE® NOW in Orlando, Florida, SAP  announced the latest version of its enterprise performance management (EPM) solutions. The 10.0 release represents the culmination of a journey that originated four and a half years ago as SAP began to assemble a broad portfolio of products, beginning with the acquisition of Pilot Software and Outlooksoft. Later, in 2008 the merger with Business Objects expanded this portfolio and in June of that year SAP announced a longer term road map. Release 10.0 is the last major milestone of that journey in delivering a suite of products that SAP describes as unified, comprehensive and transformational.  The goal of 10.0 is to “move EPM best practices beyond the finance department to managers throughout the company, helping people make risk-aware decisions that positively impact enterprise-wide performance.” The tools are now in place, but are companies ready and willing to be transformed?

A Bit of History

Effective management of enterprise performance, by its very nature, is dependent on consolidating data and providing visibility. An EPM application can never be effective as a completely stand-alone function. The better it can consolidate data and present it in the proper context, the more effective business execution and decision-making. Therefore the journey of SAP’s EPM solution covers a lot of ground.

The first stop on the journey was Release 7.0, which was delivered in August 2008. This first release honored prior commitments to enhance functionality and incorporated the underlying technical architecture of NetWeaver. Specifically 7.0 focused on ERP and NetWeaver and NetWeaver Business Warehouse (BW) integration into legacy SAP applications (Business Planning and Consolidation and Strategy Management).  It also delivered Business Intelligence (BI) integration into legacy Business Objects applications (Financial Consolidation and Profitability and Cost Management). 

Release 7.5 followed later and was the first to bring the various components of the portfolio together as a suite of products, adding integration of SAP applications and BI. Then Business Objects applications were optimized for ERP (often the source of the transactional detail upon which decisions are based), NetWeaver and BW. EPM 7.5 also introduced cross-application scenarios between EPM and Governance, Risk and Compliance (GRC). But the various components were still separate applications, although with “best-of-breed” integration.

Keeping this all straight is tricky and somewhat confusing, but also reveals the extended scope of the task at hand. EPM 10.0 brings to fruition a true suite, making the heritage of each component a non-issue. The suite brings a harmonized user interface across all components, along with next-generation productivity tools. In addition to the development efforts specific to EPM, it also leverages development efforts from other parts of SAP:

  • In December, SAP launched the SAP® In-Memory Appliance software (SAP HANA™). HANA is now the technological root of everything SAP develops. The message of HANA was always about “big data”. Indeed it allows people to analyze huge amounts of data in real time even at the lowest level of non-aggregated detail. But customer examples highlighted at SapphireNow prove it is also about speed: Examples like reducing the time to retrieve data from 77 minutes to 13 seconds or from 8 hours to instantaneous.
  • In February, SAP launched the culmination of three years’ development in BI and enterprise information management (EIM) software. These were critical components of the of SAP® BusinessObjects™ analytic applications which started rolling out in the fall of 2010 and continue to be built out for specific functions and industries.  Strong BI tools are important but applications ready-built with these tools are more easily consumed by the audience for EPM – namely executives in charge of strategy and execution.
  • In March, SAP launched GRC 10.0 -solutions to help organizations move GRC practices out of the hands of a few so everyone in the organization can participate in mitigating risk and increasing corporate compliance. In concept and practice these functions should be attached at the hip to performance management.

So given this firm foundation built over the past four and a half years, how does SAP substantiate its claim of unified, comprehensive and transformational?

Unified

Unification in EPM 10.0 goes beyond the harmonization of the user interface across the various components of EPM. Yes, a shared user experience does indeed reduce learning curves and a familiar look and feel reduces the intimidation factor of something “new.” But equally important is the unification of EPM with other tools, including NetWeaver and ERP as well as desktop productivity tools. Indeed Microsoft Excel has become a universal management tool, often in place of or in spite of applications that are implemented.

Exporting data from any application to a spreadsheet has become basic functionality that is expected of modern enterprise applications, as is using spreadsheets to import data. But EPM 10.0 goes beyond this simple extract and Excel essentially becomes the user interface.

Several early customers of EPM 10.0 expressed this as one of the major benefits and also key to user adoption.

Case in Point: Under Armour, Inc.

David Roberts, senior manager from Under Armour points out most business professionals have had some exposure to ERP, which provides much of the content for performance management. “But there are a host of ERP players, and there are often very distinct differences and a steep learning curve in moving from one to another. But if the user interface is Excel, even kids right out of college know it and use it. In fact that is how we have built our Business Analytics Team (BAT). It consists of a bunch of kids out of college. We take them from all departments and teach them to collect and analyze data. BPC [SAP BusinessObjects Planning and Consolidation] is the tool used most because they have the skills to use it. We expand their knowledge, taking advantage of add-ins. [EPM can become an add-in to Excel.] User adoption is driven by the fact that it looks so easy. In fact that can become an Achilles heel. As they see it do so much, they want it to do everything.”

Who is Under Armour?

Under Armour is a sports clothing and accessories company, providing high-tech sports gear to professional and collegiate athletes in addition to offering its product lines in retail locations. In 2006 the company expanded its offerings to include footwear in 2006; it continues to expand those  offerings, announcing its first line-up of basketball shoes in Fall of 2010.

Under Armour is a publicly traded company (NYSEUA)with revenues in 2009 of $856 million and 2200 employees.

www.underarmour.com

Data can also be easily dragged from EPM to Microsoft Word or PowerPoint documents (Word and PowerPoint plug-ins are available as well), thereby saving time and effort in the effective communication of results.

While many in the finance department may be content to reside in and communicate via spreadsheets all day, it is also possible to construct personally tailored views that bring in other content, not only from SAP enterprise applications, but from the Internet as well. One could easily construct a dashboard from which 90-100% of the day’s activities, including e-mail and social media outlets, could be conducted.

 

Comprehensive

Indeed, while Excel has become an almost universal “language” for the finance team, it is not just finance that EPM 10.0 is meant to “speak” to. SAP’s BusinessObjects EPM solutions are generally recognized as delivering one of the most complete and mature sets of solutions for the office of the CFO, including strategy management, planning, budgeting and forecasting, financial consolidation, and profitability and cost management. In addition, SAP added a Disclosure Management application to help companies go the last mile in finance in producing accurate and timely financial statements.

But SAP intends for EPM 10.0 to reach beyond the finance office, targeting key decision makers in other functional areas of the business, including supply chain management, procurement, sales, manufacturing and demand planning. The new EPM release powers newly launched SAP BusinessObjects analytic applications designed for role-specific users in a variety of industries and lines of business. These offerings are quite diverse, ranging from risk reporting in banking to trade promotions for consumer products to upstream operations performance analysis for oil and gas or intellectual property (IP) rights analysis for the media.

Across the SAP BusinessObjects portfolio, the 10.0 release encompasses new offerings such as SAP® BusinessObjects™ Sales and Operations Planning. It also further enhances previous releases of the SAP® BusinessObjects™ Spend Performance Management and SAP® BusinessObjects™ Supply Chain Performance Management.

While these specific applications naturally extend to other functional areas such as procurement and supply chain management, at least in some of the early adopters, the planning and overall corporate performance activities of EPM 10.0 haven’t made it too far past the finance department. These early adopters all point to the Excel interface as a means of user engagement. But not all walks of life live and breathe Excel. In some cases perhaps the finance department, which generally owns and runs the solution, isn’t willing to open the doors. Or perhaps the overwhelming volume of data, coupled with the growing complexity of dependencies and data relationships is enough to scare many away. While dashboards and user interfaces have become increasingly tailor-able, often executives simply don’t know where to start.

And the volume is not about to decline any time soon. In fact it only stands to grow and may even grow exponentially. While HANA is certainly capable of responding, interestingly enough, the majority of the testimonials to date have been by CIOs. So making this happen still requires an underlying understanding of how the data and the applications are organized. Without being led by the hand, most executives will simply not venture down the path. Simplification and contextual cues are keys to bringing the proverbial horse to water.

Transformational

Which leads us to the final adjective SAP uses to describe EPM 10.0. Through unification of a comprehensive portfolio, SAP has put the power of transformation within reach of enterprises today. Functional components support risk-adjusted planning. In-memory computing has the potential to open new doors to companies in leveraging massive volumes of data for planning and decision-making, potentially making them more agile and responsive. New user experiences transform the way people interact with applications and data and expand views beyond the structured data within applications like ERP.

But top level executives have traditionally been hands off in terms of going to directly to the source for data. However, trends in mobility may be just the catalyst needed to prompt better engagement. EPM 10.0 includes applications for the iPad (by Apple) and the Playbook (by RIM). With the advent of newer devices that are easy to carry, even easier to use and allow for more graphical visualization, executives are increasingly going mobile and using those devices for more than email and phone. In a way, these unwired devices are tethering them more closely to the business. But the limited real estate on these devices, even on tablets, and the perspective of being “on the move” will force a cleaner approach to communication and perhaps reinforce the KISS principle – keeping communication short and simple.

In today’s global economy, where markets and technology are changing at supersonic speed, where we are bombarded with noise and drowning in data, transformation may be necessary for survival. Keeping it simple will become even more difficult in achieving the goal that David Roberts has set for Under Armour with its EPM 10.0 deployment. David asks, “How do I answer the question I don’t know to ask?”

Indeed EPM 10.0 has the power to transform the business into an efficient, risk-aware, performance-driven culture, but only if the enterprise is aware of the possibilities and open to transformation. Many have a long way to go.

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SAP Business All-in-One Living Up to Its Name

SAPPHIRE NOW 2011 proved to be just too busy to fit everything in this year – not surprising with everything going on. And sometimes, the more you learn, the more questions you have.  So when I got home I put together a list of questions I had for several of the teams, including a couple of the teams in the SAP SME group. More recently I sat down (virtually) with some of the SAP Business All-in-One (BAiO) team to get the BAiO questions answered.

For those of you not familiar with SAP Business All-in-One solutions, they target mid-size or fast-growing small companies. These solutions are based on the same SAP ERP that is included in the SAP Business Suite. But the idea behind this separate “product” is to package a very comprehensive and powerful, and therefore potentially complex solution in a way that makes it more consumable for those mid-size companies that don’t have the man-power or the deep pockets of a large enterprise. As a result, the BAiO strategy is built around three pillar adjectives: comprehensive, industry-specific and scalable. Here’s an update based on yesterday’s conversation.

My first question to SAP was this: “Is SAP Business All-in-One an ERP solution, or is it a suite that includes ERP?” The answer lies hidden in plain view in its name – all in one. When my ancient printer started acting up, I didn’t go out and buy a separate printer, scanner, copier and fax. I bought a single device that had all those functions in one, even though my trip to Staples was prompted by my immediate need to print. Generally speaking, the need that sparks the evaluation and acquisition of BAiO is centered around the need for ERP. Yet a customer solution to meet those requirements might also include CRM (customer relationship management), SRM (supplier relationship management) and BI (business intelligence). If so, the solution that is delivered might include all four. If not, a BAiO solution is delivered with just ERP.

So a BAiO solution is a bit more configurable than my simple all-in-one printer/scanner/copier/fax. In fact I do print, copy and scan but I don’t send or receive faxes because we already have another device that does that and fax is not exactly my preferred method of communication. I couldn’t buy a “not quite all” in one that excluded the fax. If the ability to fax made printing, copying and scanning more complicated or difficult to use, I might not have purchased it. But in fact it is quite simple to use and the price of the “all in one” was far cheaper and easier to install and use than buying separate devices and integrating them – sort of the concept behind BAiO.

But an SAP Business All-in-One solution is that configurable. I can buy just ERP or ERP pre-integrated with CRM, SRM and/or BI. Even if I don’t buy those add-ons right up front, I can add them later, which is a critical element to the “highly scalable” message. Some other vendors constrain ERP to be a smaller, lighter version of ERP in order to remove complexity and cost but then require trade-ins, upgrades or migrations to the full blown ERP, even though code is shared between the two versions. Not so with BAiO. There may be modules (that were never included in the original configuration) that need to be purchased, but there is no additional charge for what is already installed – unless of course you need to support more users.

For example, financial and management accounting modules may have been originally configured for a single entity and as the mid-size company grows, adding additional divisions and legal entities requires no additional license because those features are certainly supported in those modules of SAP ERP. But if the need for financial supply chain management arises, where none was previously required, that module needs to be purchased.

But BAiO also stretches beyond standard ERP, CRM, SRM and BI. There is not just one BAiO model from which to choose. A BAiO solution starts with one or several of the core enterprise applications (ERP, CRM, SRM, BI) and adds industry-specific best practices that pre-configure the applications for a particular need. With over 620 “best practices” defined, many of the decisions that typically need to be made during implementation, have already been made, simplifying the process. These are configuration settings, process workflows and roles. Then on top of these applications and best practices, partners are also likely to add additional features and functions, which constitute their own intellectual property (IP). This gets packaged together and offered as a specific BAiO-based solution.

Let’s relate this back to my all in one printer. It does the standard four functions: printing, copying, scanning and faxing. What if I needed to laminate the documents I just printed? Too bad. That’s not a function provided by an all in one printer. I need to buy a separate device. Not so with BAiO. That’s where the partners come in, developing additional IP, but delivering and supporting it as a single, integrated extended solution. BAiO is sold almost exclusively by partners, who play an important role in these extended solutions – making the product more comprehensive and industry-specific by developing additional industry specific functionality and providing deep domain expertise and local support.

There are over 800 of these BAiO solutions available today from over 1400 partners. Some are quite broad and others quite narrow, ranging from a general solution for a discrete manufacturer who makes to stock to a specific solution for toy manufacturers in Hong Kong.

OK, this is all good, but it isn’t really new. SAP has been developing and touting best practices and industry specific functionality in BAiO for years now. The emphasis on the partners is fairly new. SAP has spent the past year revamping its channel programs and its intent is to sell into the SME (small to medium size enterprise) 100% through channels. There are a few exceptions to this where there is no coverage in a particular geographic territory, but this is extremely rare. Where might SAP direct sales step in? In a two tier or what SAP calls a “business network” environment, where corporate offices are running the Business Suite (or maybe R/3) and they are rolling BAiO out to their network of divisions or subsidiaries. But even in this instance, partners usually provide local support.

But perhaps where the BAiO user is likely to see the biggest change is in the experience of working with the product. You really have to see this to get the full effect because describing the new user interface as a portal or a mash-up really doesn’t do it justice.  SAP isn’t the only company taking this route lately. In April I wrote about Infor Workspace: Work Without Leaving the Comfort of “Home”, and the concept of a role-based user experience akin to setting up a home base of operations from which a business user could comfortably operate all day long, without ever leaving “home.” I followed that in May with Wanted: Lawson Users to Develop New Applications…No Programming Experience Required talking about a new tool that helps Lawson’s customers build their own mini-applications without having to write software code. The new NetWeaver Business Client, available for BAiO combines both these concepts, blending data from and activities performed within and outside of the solution. This new experience, packaged with SAP’s Business Analytics has the potential of drawing in executive users that might otherwise have shied away from laying their hands on a keyboard to touch ERP.

SAP’s BI offering has been a part of BAiO for a while now. But in the past, BI represented a series of tools to use in building your own views and analysis. Today the integrated business analytics offering provides 31 interactive dashboards that are more like out-of-the-box applications than tools – providing more sum and substance to help Business All-in-One truly live up to its name.

What’s next for BAiO? Obviously functional enhancements made to the Business Suite will percolate down to BAiO. The BI strategy will continue to be important, as will mobility, bringing enterprise data to the mobile device in a very easy and consumable fashion. SAP also will continue to build out the Business Network Integration story in multi-entity corporations that operate much like a network of small to mid-size companies. And finally, the 2011 and 2012 timeframe will see more concentration on reaping the benefits from SAP’s in-memory computing technologies. SAP’s HANA is just as much about “fast” as it is about “big data”, making it just as valuable for the mid-size company who prefers to get their data “all in one” view.

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SAP Business ByDesign Status, Momentum and Plans

My very first meeting at Sapphire 2011 was an update by Rainer Zinow on SAP Business ByDesign on its status, traction and plans for the future.  The briefing was also attended by other analysts who cover (exclusively or at least in part) the SME enterprise application market. Rainer started the meeting by throwing us a curve and asking us what we wanted to hear – a refreshing change from the usual, “Here’s what we want to tell you.” My question was essentially how SAP was progressing in building the volume business ByDesign is intended to be. It looks like a lot of progress has been made but momentum is still building.

SAP now has 500 Business ByDesign customers and says it is on track to meet its goal of 1000 by year end. After the briefing I tweeted that factoid and almost immediately got a response questioning, “How long does it take to go live on #SAP ByD? Can they mathematically get to 1000 implemented by year end?” My response was (in not so many Twitter words), don’t confuse selling with implementation.

SAP never said that 1000 customers would be live. In fact one of the ByDesign customers I spoke with today (Technodyne) actually went live in 16 weeks. But my experience from talking to ByDesign customers over the past several years is that there is the same variability in implementation cycles as there is for any ERP. I’ve seen ERP go in quick and dirty, fast and solid, well-paced and methodically, or slow and painful. The time required in order to go live often has as much, if not more to do with the company doing the implementation than the solution itself.  

That is of course providing the solution is a good fit and, in the case of small companies, not overly complicated. But the whole reason SAP started from scratch in writing Business ByDesign was to reduce the level of complexity that becomes inherent in a solution that starts out as a large enterprise solution, and grows more complex through evolution. Today ByDesign is still primarily targeting companies with 50 to 500 employees which do not require highly tuned industry-specific functionality. There is one industry in which it is particularly strong (professional services) and there will be more industry specific functionality developed, but SAP never sees it becoming an option for certain industries requiring certain select functionality. Don’t expect a version for pharmaceuticals or oil and gas any time soon.

So what else can I share with you about the status and momentum of Business By Design? If you have been following SAP’s “on demand” plans you will have noticed a major strategy shift over the past year plus. Originally there were really two on demand strategies – one for SME (small to midsize enterprises) and one for larger enterprises. SAP called this the “Line of Business” (LOB) on demand applications, presumably because these other on demand solutions were targeted to specific areas of the business such as sales, procurement or human capital management. But they weren’t ERP. They extended or surrounded ERP, which for the large enterprise was largely staying on premise, or perhaps being outsourced or hosted. Originally these LOB applications were developed using a very different infrastructure than that used to develop and deploy ByDesign, with some technology acquired through SAP’s acquisition of Frictionless Software.

But that all changed as SAP made some breakthroughs in the ByDesign infrastructure.  ByDesign became multi-tenant , which was an important step in turning it into more of a volume business. Then, the underlying technology behind ByDesign became the platform of choice for new on demand development at SAP including Sales On Deman, Career On Demand and Travel On Demand and others to come. Sourcing On Demand remains on Frictionless and Carbon Impact runs on a different platform (River). The development teams were consolidated under Peter Lorenz and development, support and management of the products moved to China.

The release of the SDK (Software Developer’s Kit) ByDesign Studio is also an important consideration. In the early days, while there were certainly ways to configure and tailor the solution, no customization of ByDesign was supported even though the software ran as a single tenant. But with the release of the SDK, SAP can offer customization in multi-tenancy, although with the stipulation that all customization is delivered in the context of the SDK. Additional business objects, and additional logic can be added and partners are also able to further monetize these efforts by publishing to an online SAP store. While available from the store, the customization or extension is purchased from the partner who develops it. Of course SAP takes a cut… after all it is providing the showcase and vehicle for purchase, as well as the SDK itself and it takes an active role in quality certification. And of course the software is hosted by SAP. Remember it is not licensed but sold as a service.

This ability to customize is important as Business ByDesign moves from being just a solution for small to midsize companies. SAP sees a strong market in large enterprises – not at the corporate headquarters, but perhaps in more of a tiered solution structure, satisfying the needs on divisions, business units, remote locations, etc. The first integration scenarios delivered with Feature Pack (FP) 2.6 were also important first steps in supporting this multi-tiered scenario. But even as ByDesign starts to penetrate these larger enterprises, SAP assures us it will also remain true to its heritage, as a midmarket solution. Indeed, even these larger enterprise implementations start off small, sometimes with 10 users, perhaps as a pilot. As they achieve some success, users still need to sell the solution internally. So it opens the door, but there is still the need to go back and do more selling. This is the only part that to me doesn’t lend itself to a real volume sales business. For very high volumes you need to get in and sell and then move to the next sale, and the next… all without losing the relationship with the customer that has become more and more important to SAP. The one redeeming factor is that in some cases this added selling has led to as much as an 80% penetration which is unheard of in the large enterprise (Business Suite) world.

Today SAP hosts the software in two locations: Germany and in the United States. And just this afternoon news broke of a partnership with China Telecom to provide the service in Asia. I’m sure we’ll hear more about that in the days and weeks to come. But in the meantime, SAP is fully certified to be SAS 70 Type II compliant, satisfying more stringent requirements than the Type I compliance achieved by most service organizations, including the ability to be able to sustain operation with power and with no air conditioning for 3 days. While this may not have seemed to be a requirement in the past, recent disasters and extreme weather conditions make this more relevant today.

All told, after getting off to a slow early start, momentum is building and SAP has a very good story to tell about progress made in turning the Business ByDesign business into a volume business.

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