In our prior Supply Chain Matters briefing, this author provided initial highlights and takeaways regarding important shifts in strategy that came out of this week’s SAP Sapphire customer conference. In this particular posting I want to briefly contrast recent enterprise software conference we have covered to highlight contrasting messages regarding customer needs.
As was noted regarding SAP 2016 Sapphire, the primary message delivered was Empathy for customer needs along with yet another commitment toward simplicity and openness to customer needs for faster and far more affordable technology deployment. SAP was forced into this posture because customer’s are making their voice heard and our demanding more attention to their particular needs and requirements for technology deployment.
At Oracle’s 2015 Open World customer conference held in October, Co-CEO Mark Hurd’s keynote address reflected solely on the current challenges and needs of today’s business leaders. Hurd noted the average CEO tenure is 4.5 years, and the overwhelming emphasis is performing quickly to survive. The pressures to take out costs, grown revenues and profitability is constant and that is translated across lines of business and supporting operations such as the supply chain. Further noted is that the average ERP application is 22 years old, namely pre-Internet, pre-Cloud, and pre-social applications. Businesses are frustrated in their ability to update such scope of technology because of the concern for business disruption and added costs, what Hurd described as “ERP Fatigue.” Because of that, the majority of IT budgets today are consumed by maintaining existing technology vs. investing in new technology. All of this is translated into by Hurd into Oracle’s ongoing ten year transition into becoming a predominant Cloud based applications, database and IT infrastructure provider dedicated to supporting the widest variety of customer technology adoption, deployment and ongoing support needs up to and including consuming IT needs in public utility type model. Founder and CTO Larry Ellison described the new era of utility computing as big as when PC’s arrived in the IT landscape, with more and more workloads destined to the Cloud. He also acknowledged that Oracle’s Fusion deployment took upwards of ten years because of the engineering efforts required, but at the same time, during this transition, all existing Oracle applications both legacy and acquired were supported by Oracle to assure a continuity of responsive support.
QAD which is focused on mid-market manufacturing and multi-tier ERP support needs conducted its Explore 2016 customer conference in May. Since 2012, QAD has been investing a hefty R&D budget directed at a major revamp of the firm’s ERP applications and technology deployment strategy which includes emphasis on enabling what this technology provider terms a more effective organization with more connected business processes. The emphasis articulated was listening to customer needs for providing more standardized solutions, a more flexible platform that included suite-wide analytics, along with product enhancements directed at augmenting program/project management, manufacturing automation and customer engagement needs. Another major emphasis requested by customers was in enhancing the user experience and in providing more flexible Cloud ERP and Cloud EDI deployment options. What impressed this analyst was the flexibility of options that QAD is providing its customers. Instead of a forced march approach compelling customers to move to the Cloud, QAD has fostered options to both maintain existing behind-the-firewall applications and deploy extensions of Cloud based applications within an overall cohesive systems architecture framework. The strategy extends through additional years with multiple on-ramps and deployment options.
And so it continues with many other new or existing behind the firewall and now Cloud based technology disruptors today, large or small. The emphasis is clearly focused on addressing customer needs and business requirements for faster, far less disruptive and more cost affordable technology enablement.
The days of a software customer conference focused on marketing buzz, the latest cool new technology or service are no longer being tolerated. Customers demand and insist on responsiveness to their needs, support and ever changing business need requirements. While IT remains influential, lines-of-business and senior operational executives are now the prime buyer influence and there are no legacy allegiances to enterprise software vendor lock-up. The focus is clearly what you can do for my business, when will you get it done and how will you save our business additional money and resources.
Most important of all, the notion of ongoing trust and business partnership has once again renewed itself, especially when it includes placing computing and decision-support needs in the Cloud.
The notion for never trusting what a software salesperson communicates or promises has transcended to seeking technology partners that completely understand the customer’s business needs and are willing to be a continuous responsive partner to those needs.
© Copyright 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved
SAP’s 2016 Sapphire Customer Conference- Important Shifts in Strategy and a Clear Response to Voice of Customers
May represents the height of the spring conference season and these past two weeks have featured many, including SAP’s annual Sapphire and ASUG customer conference held in Orlando. Due to scheduling and other client commitments, this author did not travel to Orlando but did have the opportunity to view most of this year’s Sapphire keynotes.
As a supply chain and B2B industry analyst, as well as a former SAP supply chain management marketing director, I have attended and participated in many Sapphire events over the years. Each year brings a new set of messaging and often different personas related to SAP and its efforts to support customers as well as sell more technology and applications. In this posting I am going to share my first impressions from what I heard this year which I believe represent important shifts in strategy and a reflection that SAP customers are now the focal point for driving changes in ongoing technology strategies and not the other way around. The open question is whether such a shift will have a lasting presence.
The opening keynote address from SAP CEO Bill McDermott provided its usual surprises. The CEO openly admitted that he ditched his original keynote content 15 days before Sapphire. The reason cited was some pointed feedback received from customer CIO’s as well as from SAP Board members. Instead, the message was one of acknowledgement that SAP was not listening and responding to customer feedback. McDermott therefore declared that empathy would be the number one message delivered at Sapphire, “Empathy” for customer needs in technology adoption and to clearer roadmaps for the adoption of SAP’s newest business suite, SAP S4/HANA and other Cloud based applications and technologies. In fact, this and later keynotes provided some admission that SAP might have rushed SAP S4/HANA to market without deeper consideration on the overall impacts to customers from a number of dimensions. That is uncharacteristic of the SAP of ten years ago. In our Supply Chain Matters commentary in February of 2015, we reflected on the stated risks and implications of S4/HANA.
This analyst has experienced a similar frustration in that depending on who you talk to at SAP, you tend to often receive a different interpretation of an application’s support capabilities and roadmap. Finding the right person with specific knowledge remains a challenge and indeed, SAP employees are just as confused as customers- at least that act that way. An overall focus on revenue and profitability attainment has outdistanced sensitivity to the voice of customers.
Even more dramatic from my lens, McDermott flatly stated that he takes the issue of accountability personally and urged customers to email him directly if they were “not feeling the love from SAP.” A subsequent panel consisting of SAP line-of-business executives featured actions each executive is taking to assist customers in technology transformation, but this observer found such statements unconvincing and more related to marketing speak. McDermott declared that every major SAP engagement will have an executive sponsor accountable for customer results. Further declared was that SAP’s partners need to get on the bus as well, declaring that SAP requires that such partners will be required to adhere to a newly outlined value assurance pledge.
The takeaway is obviously a reflection that SAP and its partner ecosystem executives should now expect to be measured or rewarded on market responsiveness and meeting broader and more specific needs of customers. It is accountability time at SAP and that includes a delicate shifting from what SAP has desired in business outcomes to what it should have been, what SAP customers require and demand in their business process support needs and in supporting required outcomes in IT cost, adoption and flexibility.
In his 2015 book, SAP Nation-A Runaway Software Economy, Vinnie Mirchandani masterfully addressed his belief in what SAP needed to address to make its customers successful in their business and technology deployment goals. Included were specific observations on why other Cloud-based technology competitors have been able to gain attraction among the existing SAP customer base because of the building business pressures and frustrations over elongated development timelines, burdensome software and ongoing support costs. The consequence was described as a ring fence of applications that more and more, are surrounding SAP applications and that definitely includes technology supporting various procurement, manufacturing, supply chain and product management business process needs. As the adoption of Cloud computing continues to increase, the book opined that SAP runs the risk of becoming even more distant in understanding its customer business needs.
We again cite this reference because that is indeed what came to mind in listening to this year’s Sapphire keynotes. SAP customers are themselves making SAP change.
In a recent deal architect blog commentary, Vinnie has since opined: “… I am becoming more convinced the turnaround will not come from SAP or its partners, but from actions SAP’s customers take over the next few years.”
From my lens, what transpired this week at Sapphire was indeed the voice and influence of SAP’s customers in demanding that their business needs must be accommodated and that SAP will need to step-up its overall responsiveness to such needs. That is by far the most important takeaway of the 2016 Sapphire event.
Supply Chain Matters will feature some additional insights regarding the messaging and implications of this year’s Sapphire in subsequent postings.
© Copyright 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
In our most recent Supply Chain Matters commentary related to Apple that noted the huge thud that rang across Silicon Valley, we explored potential areas of product management related areas that are now under enormous pressure to energize additional product volumes and consequent product and services revenues. This week features an announcement of a new partnership directed at enhancing the business applications support applicability to Apple’s mobile devices.
Apple and SAP jointly announced a partnership directed at revolutionizing the mobile work experience for enterprise customers of all sizes, combining powerful native apps for iPhone and iPad with the capabilities of the SAP HANA platform. According to this announcement, this joint effort will further deliver a new iOS software development kit (SDK) and training academy so that developers, partners and customers can easily build native iOS apps tailored to their business needs, including forms of analytics.
This partnership for leveraging more business applications on Apple’s iOS come after prior joint-development announcements with both IBM and Cisco. In a related interview conducted with The Wall Street Journal, Apple CEO Tim Cook re-iterated that leveraging enterprise business applications on Apple mobile devices is a key growth opportunity. However, he declined to share an update on any revenue numbers to-date related to prior joint-efforts this area. Cook further indicated that he view the SAP partnership as a “starting gun” for the development of workplace applications similar to the opening of the Apple App Store in 2008.
That obviously established some ongoing high expectations for all parties in this area.
The timing of this announcement is noteworthy, since he comes two weeks before SAP’s annual Sapphire customer conference, where no doubt, some keynote stage time will be dedicated to this new partnership. Then again, we can all speculate as to why the announcement was moved this week, rather than during Sapphire. Perhaps Apple needed to have some positive news streaming this week.
I suppose we can all look forward to more SAP supply chain, PLM and procurement applications and supporting analytics capabilities running on Apple mobile devices. The open question remains timeframe.
Latest Enterprise Technology Vendor Financial Results Point to Differences in Cloud Based Adoption Momentum
It should be no secret that most enterprise information technology vendors have embraced cloud-based applications and technology as a dominant strategic direction. The reasons are obvious and compelling. They are the key to customer and long-term revenue and profitability growth. Recent quarterly financial performance reporting from key enterprise technology providers such as IBM, Microsoft, Oracle and SAP provide indications on business strategies gaining more customer attraction as well as market momentum.
In a prior Supply Chain Matters commentary, The Value Proposition of Cloud Computing is Broader in Scope and in Business Implications, we observed that cloud-based platforms and applications provide businesses with added flexibilities in their technology and software requirement needs. Businesses remain under compelling pressures to respond to rapidly changing market needs and at the same time, continue to reduce costs. That includes the ongoing costs of IT, where studies continually reinforce that 50-75 percent of costs stem from maintaining existing IT infrastructure or business software applications. Rather than expending additional capital investments for IT hardware, infrastructure and applications support needs, cloud-based platforms provide a more attractive financial model that is more attuned to ongoing operational growth or adjustment needs. As noted, why settle for business process innovation that can cycle in intervals of 5 years or more, when an option of technology releases every 6 months are available? Cloud based technology implementation can also be less disruptive to ongoing business operations since adoption involves a singular, consistent cloud-based application and support model.
For enterprise and other technology providers, cloud-based offerings are becoming a very strategic growth aspect, affording such vendors a more recurring, subscription based revenue stream that can provide more predictable revenue and profitability stream.
The ongoing open question remains in strategy and ongoing execution.
In their latest quarterly financial reporting, both IBM and Microsoft reported setbacks in anticipated cloud based revenue growth. The latter was somewhat of a surprise, since Microsoft’s Cloud based growth trajectory had shown consistently positive growth. IBM on the other hand, by our lens, continues to have an ongoing execution problem in bringing Cloud based technology and applications to market on a more timely and compelling basis. IBM’s cloud-based strategy remains a work-in-progress while its legacy services businesses remain a drag on revenue and profitability growth.
A far more interesting contrast, one perhaps more of interest to our blog readers is that of Oracle and SAP.
The latest SAP financial performance release features the headline of first quarter non-IFRS Cloud subscriptions and support revenue growth of 33 percent at constant currencies on a year over year basis. The Walldorf Germany based technology provider reported what it termed as a solid 23 percent growth in new Cloud based bookings equating to roughly $165 million in new cloud-based revenue in the first quarter. Further declared was that the total of cloud subscriptions and support along with software support revenues (we interpret that to mean all software support) reached a 69 percent share of total revenues in Q1.
The financial report additionally cites SAP S/4HANA customer momentum in the quarter adding more than 500 customers of which 30 percent are described as new customers. By our lens, the wording smacks more of a marketing brief since there is still a lot of confusion relative to the overall composition and deployment needs of S4 HANA, particularly from an overall end-to-end supply chain support perspective.
Meanwhile, SAP’s bread and butter software license revenues fell 13 percent with the implication that the conversion to a predominant Cloud-based services business model remains somewhat of a challenge. An evidence point relates to sales and marketing expenses which have grown 5 percent year over year.
In mid-March, Oracle reported fiscal Q3 2016 results for the quarter ending in February and Supply Chain Matters featured key highlights and takeaways. The headline was that Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were up 61 percent at constant currencies while total Cloud revenues were $735 million, up 44 percent in constant currencies.
Our calculation of the total of Cloud subscriptions and support added to total customer support revenues equate to 76 percent share of Oracle’s total revenues in the February ending quarter. That would imply that Oracle’s broader strategy of support for both IT infrastructure and various software applications may indeed be garnering increased momentum.
Once more, Oracle has placed more emphasis on the amount of customers that have gone live with various Cloud based infrastructure and applications. Oracle states that it had more than 250 customers go-live on Fusion SaaS HCM and Fusion ERP in Q3 alone. Oracle further declares nearly 2000 Fusion ERP customers thus far, ten times that of Workday. Equating that number to a prior Oracle industry analyst briefing declaring 1500 Oracle Cloud ERP customers at the end of fiscal Q2, implies another 500 customers on-board in the latest quarter.
Right now it’s difficult to equate that to equivalent SAP S/4 HANA total customers to-date since reporting by SAP is elusive. Oracle Fusion ERP does contain some basic supply chain business process support. As we have noted in prior commentaries, Oracle has developed, by our lens, one of the broadest cross-functional SCM public-cloud based applications currently available in the market.
Thus, our scanning the latest financial results of select enterprise technology vendors, our assessment is that Oracle’s broader Cloud product support strategy coupled with more integrated sales execution is indeed paying off in added market momentum.
Rest assured, this remains an ongoing competitive battle, and more evidence will need to come forward. However, from an overall Cloud based supply chain business process support perspective, we continue to believe that Oracle provides broader and clearer options for Cloud based benefits in addressing both IT cost reduction needs as well as flexibility in cloud-based applications deployment either in private or public Cloud based deployments.
© 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Disclosure: Oracle is a client of the Ferrari Consulting and Research Group, the parent of the Supply Chain Matters blog.
SAP announced this week the official release of SAP Integrated Business Planning 6.1 for response and supply. With this latest release, SAP claims that all of the major components of this broad based application, first announced in 2012, are now available.
This Cloud based application runs on the SAP HANA platform and includes support for sales and operations planning (S&OP), product demand sensing and planning, supply and allocations planning, response planning and inventory optimization. SAP Integrated Business Planning is actually a set of five Cloud based applications deployed via a subscription model. Variants include S&OP, supply, inventory, demand and SAP Supply Chain Control Tower.
SAP claims that this application suite has grown in cross-industry adoption and functional depth. This author reserves judgement on that claim since SAP installed based feedback continues to indicate reservations in adoption. One ongoing concern is obviously the deployment of all mission critical integrated business planning in a hosted Cloud based platform as well as the implications of user training for the SAP HANA platform.
To help in that effort, SAP continues to offer a rapid-deployment service, described as a set of best practices and enablers to facilitate time-to-value. In this week’s release announcement, the enterprise technology provider indicates introduction of a promotional package to be offered to existing SAP Advanced Planning and Optimization (SAP APO) and the SAP Enterprise Inventory and Service-Level Optimization Analytics application. Supply Chain Matters will be reaching out directly to SAP to seek more knowledge regarding the composition of these promotional packages.
Readers contemplating this application may want to partner with an experienced third-party systems integrator and supply chain consulting firm with strong credentials and knowledge of SAP supply chain management applications, especially if considering a transition from one planning platform to the other.