KISS – you know, Keep it Simple Stupid…is a directive that is usually quite appropriate whenever technology is involved. And now thanks to SAP AG we can rejigger that a bit to read, “Keep it Simple SAP.” More specifically “Run Simple” is now officially SAP’s new tagline, a new marketing strategy, and the company’s new cornerstone for its product development strategy. It is a very interesting move for SAP for various reasons and on a variety of levels.
The obvious ones are what SAP’s now sole CEO, Bill McDermott, emphasized during his SAPPHIRE NOW 2014 keynote address last week. There are a number of things simplicity brings to the game for both SAP and its customers: decreased complexities (of course), ease of use, far better UIs, increased productivity, speed to market, lower TCO, and increased strategic advantages – which more often than not equates to non-trivial increases in top line revenue. Increased top line revenue + lower TCO lead of course to non-trivial increases in profitability. That is the business side of things.
On the technical side SAP is essentially engaged in, to paraphrase SAP Chairman Hasso Plattner from his SAPPHIRE keynote, “a full scale exercise of radical, disruptive innovation” of SAP’s core platforms (that amounts to tackling over 400 million lines of existing code!). Keeping things simple is a hugely complex undertaking. Plattner and various guest speakers deliver lots of compelling insights in his keynote. In particular, Plattner also shared the stage with Harvard Business School Professor and author of “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail,” Clayton M. Christensen – the two of them together make the keynote a must watch.
The other day my research colleague Scott Pezza (@scottpezza) – a braver soul than I – provided great insights into the Run Simple mantra, and used SAP’s own Simple Finance (SFIN) on HANA to illustrate the Run Simple possibilities. Make sure to read it! In truth it would take roughly 200 blog posts to cover everything SAP delivered on but Scott’s attempt to captures it is right on the money. My goal is to capture the somewhat more amorphous issue of what underpins Scott’s post and the other 199 posts we could write had we but world enough and time, and why I believe SAP will pull it off.
The issue of simplicity – to put it as simply as possible – has at its core SAP’s full-throttled move into cloud computing, and the continuing success and adoption it has found for its in-memory database HANA (3200 SAP customers and rapidly growing).
I consider HANA one of the seminal IT developments of the decade and Scott provides some useful HANA insights from Plattner’s keynote in his post as to why it is seminal and critical to SAP’s future. Let’s just say that real time, on the fly analysis on terabytes of data is non-trivial and an absolute requirement for any business to succeed going forward. HANA is a platform I will keep a very close eye on going forward – especially as it has numerous implications for mobility, but for now we’ll leave HANA for the rest of this post.
A Head in the Clouds
It is important to touch on the cloud computing end of things. SAP is clearly headed to an all cloud, all the time model. This is in fact a good thing and over the long term it will begin to pay dividends for SAP and its customers as it continues to invest in its cloud computing initiatives, especially its HANA in the cloud initiatives.
Just how much SAP is diving in cloud computing has been fairly apparent for some time. But perhaps the first real indication of how important the cloud is becoming (or will become) was the announcement SAP recently made back on May 6, 2014 that it is teaming with virtualization software and budding mobility vendor VMware to offer SAP’s software platforms and HANA as cloud-based services in pre-configured ways. Instead of buying separate SAP and VMWare software packages and running them on dedicated servers, customers will be able to load their data and analyze it at a much lower cost, and with a greater operational flexibility, in the cloud.
EMC (which owns a majority stake in VMWare) and Oracle have both already announced similar cloud moves and the idea should certainly not befuddle any SAP customers. It is the necessary next step for SAP to become a fully 21st century software player. In working with VMWare directly, SAP will take the issue of its customers having to find a virtualization partner off the table – call it operational simplicity, which is a permutation of Run Simple. Of course. The VMWare partnership begins to demonstrate how SAP’s Run Simple future will manifest itself.
There is one significant gap in the SAP cloud computing storyline…while SAP did an excellent job of detailing what it intends to accomplish through its cloud computing initiatives, it is clear from the SAPPHIRE NOW attendees that they would like to have seen something more than vague promises on the timelines for when SAP hopes to actually deliver on the various components of its cloud initiatives. SAP no doubt knows that it needs to put real timeframes in place and I am certainly sure that it will do so.
One key to HANA’s ongoing success has been SAP’s clear ability to compellingly demonstrate what it does. Over the last several years there have been very, very few instances where SAP was “all talk and no action” on HANA – I actually can’t think of any. The power of HANA has been easy for SAP to demonstrate both through customer deployments as well as through its own use of HANA within a variety of industry solutions SAP sells. SAP has even been able to get smaller businesses on the HANA train by partnering with Amazon/AWS to provide SMBs a way to access its power – no need to be a Fortune 250 business, a strong message on many levels.
SAP will be well advised to ensure that it moves quickly to also demonstrate the power of the cloud. That is, Run Simple cannot just sit out there as a marketing tag line that cynics and competitors can then attack. The tag line needs to immediately translate into actionable events for SAP’s customers. Yes, of course SAP knows this, but in case there are any members of SAP’s Supervisory Board team that think SAP will be ok to slide on announcing real timelines they would be very mistaken.
But let’s not make light of just how complex an undertaking this is for SAP and how complex it will be for SAP’s customers – especially the top 5,000 or so. There are enormous SAP on-premise implementations that will remain earthbound for years – if not decades – to come. IBM’s SAP Global Services teams (IBM is SAP’s single largest partner) will certainly not have to worry about seeing engagements suddenly come to an end. To put the overall challenge for SAP into better perspective, consider that SAP has somewhere in the neighborhood of 225,000 customers and roughly 2 million users.
It is indeed a long term project – the transition to cloud-based offerings is in truth 4 years old already, and HANA’s genesis goes back at least 7 and a half years – for both SAP and its customers to undertake – and clearly it will be SAP’s responsibility to ensure the Run Simple message doesn’t simply become a “throw away” marketing line. The truth is that for its massive customers it will be a very incremental process – that is fine as long as SAP is able to manage expectations and deliver the goods.
Interestingly, it will be the smaller SAP shops that will cash in sooner than later. In a sense, this is what cloud computing has always promised right? Can’t afford an IT staff? Go to the cloud. Don’t want to invest hundreds of millions of dollars in your own data center? Get on the cloud. Run Simple will be a grass roots endeavor but I believe it will quickly prove itself – SAP should be able to grow its cloud future quickly enough and become mature enough over time to finally bring the top 5,000 in line – maybe 5, 10 or 15 years down the road.
SAP CEO Bill McDermott’s Star
I am a fan of Bill McDermott. As a co-CEO, which he became in 2010, he has successfully tread a fine line between helping to push SAP into stepping up its game looking forward, and ensuring that SAP’s old management guard wasn’t thrown for any loops. In the past there has always been a strong sense of SAP looking slightly forward while remaining tightly locked into its historic roots. I’ve long wondered if SAP would be able to make the transition to becoming a fully 21st century company.
When SAP finally announced that McDermott’s thoroughly home grown co-CEO Jim Hagemann Snabe would step down and that McDermott would become sole CEO in 2014 I was quite pleased to hear it. McDermott has a real fire under his feet and will, I believe, quickly push SAP (but remember that “quickly” is a very relative term here) into the 21st century.
This year’s SAPPHIRE NOW CEO keynote fully underscores this.
Interestingly, before McDermott took the stage SAP introduced three ridiculously young folk on the cutting edge of today’s technology world (watch the CEO keynote video, they are very impressive young people). One reason they were there was to underline the notion of the need for all of us – and especially SAP and its customers – to undertake “disruptive innovation.” Why is this important? Consider the following:
These three charts – which Professor Christensen provided during his segment of Plasso’s keynote, together show the different types of innovation that are possible. It’s not my goal here to rediscover all of the notions and implications inherent in Christensen’s Innovator’s Dilemma paradigm, but it’s worth a very quick run through to understand where SAP and its customers all find themselves.
The chart on the left demonstrates “sustained (albeit incremental) innovation” – which in fact is nothing more than constantly improving an existing product. Think of it in SAP terms as SAP continuing to merely improve its on-premise-based platforms, with incremental improvements that merely lead to more of the same, if marginally improved, approaches SAP customers have traditionally taken. Note that the trend line sits at the very top of the chart, meaning that a lot of time is absorbed (typically as part of the process of “listening to customers at the top of the food chain”) in delivering minor improvements. Think of it as delivering slightly better versions of business as usual.
Innovation becomes disruptive only when it causes wholesale changes in how a given market (in this case SAP’s customer base) does business. Christensen’s belief (as detailed in his book) is that successful companies (in this case SAP) more often than not put too much emphasis on customers’ current needs (sustained innovation), and fail to adopt new technology or business models that will meet unstated or future needs (in a sense this echoes Steve Jobs, whose mantra was that customers don’t know what they want, it’s our job to tell them). When companies fail to adopt these new technologies and business models they will eventually fail.
In the case of SAP the disruptive new technology is cloud computing, where the fastest growing competitors to SAP operate. To its credit SAP has not only fully embraced cloud computing but has delivered disruptive innovation of its own on top of it with its in-memory and cloud-based HANA database.
The middle chart demonstrates the introduction of new technology delivered much more quickly than would be the norm under sustained innovation. The problem here is that for very large companies it is often very difficult to move as quickly to adopt as the new technology itself becomes available. Recall our point above that SAP’s largest customers will very likely take decades to move away from older on-premise platforms. Ah, there is the rub, or the dilemma.
The third chart essentially states the obvious – enough customers need to be able to take advantage of the new/disruptive technology or the new innovations simply won’t matter. As a majority of customers do adopt the disruptive technology, those at the top of the food chain will have no choice but to follow and adopt as well – or per Christensen they will ultimately fail.
This brings me back to Bill McDermott. As detailed in his keynote, McDermott’s strategy for ensuring that his customers, whether large or small, can adopt, absorb and utilize SAP’s new cloud and HANA platforms, is to ensure that it will not only be simple for them to do so, but that in turn adoption will lead to major simplifications in the numerous customer business and technical processes involved in using SAP’s platforms, services and products. Hence Run Simple. Scott Pezza’s blog post noted earlier provides useful examples of this.
Run Simple strikes me as a uniquely Bill McDermott strategy. It is forward looking and seeks to unshackle SAP from its past, so to speak. I am not convinced that SAP would have been able to put such a strategy in place under the old co-CEO structure, and it is the main reason I’m glad to see McDermott firmly in sole possession of the role.
Yes, there is the Supervisory Board to contend with, but it is McDermott’s responsibility to ensure that SAP finds the right singular voice with which to preach, and the right message to preach with it. Run Simple is the message and from what was demonstrated at SAPPHIRE NOW 2014 I am convinced that the entire company has that singular voice in place to move forward. I recommend watching McDermott’s video – there is much there to take in.
There certainly are a few.
One that comes to mind – the biggest in fact – is the SAP sales force, especially those on the elite end of the force who have traditionally focused on huge on-premise platform sales to perhaps a single company. How does such a collection of uber-SAP salespeople transition to selling a cloud-based subscription model? How do they go from one-off sales of premise-based platforms and the typically huge professional services revenue that goes with them to a model that revolves around recurring revenue and a Run Simple strategy that suggests a major drop in professional services revenue?
Next, I found it disturbing to learn that Vishal Sikka, who was not only informally known as the father of HANA but in fact thought of HANA as his child, recently resigned (for personal reasons – but sometimes that is merely a code for something else, perhaps a clash with McDermott as he took on his new role). And a mere few days later, Shawn Price – who had been the outspoken evangelist and leader for SAP’s cloud initiatives, departed as well. Perhaps the two of them, despite working on SAP’s disruptive efforts, were too “old school SAP” for McDermott. Are the departures an internal SAP roadblock or do they open the road up? Hard to really say.
We noted this earlier but it is worth repeating – SAP needs to add real timelines to its product delivery plans. Customers need to know.
Finally, as impressive as the Run Simple message is and as impressive as what it all promises is, only time will tell if SAP will indeed deliver on all the promises. There are significant customers already on board with where SAP is headed – for example, ConAgra and John Deere are both moving ahead with new and quite complex implementations (both of them provided insights during Plasso’s keynote). SAP will need many more of these types of customers to come on board at the high end of the customer spectrum. And SAP needs to demonstrate that tens of thousands of its smaller customers will very quickly get on board.
The irony of course is that Run Simple is an incredibly complex undertaking for SAP. The hardest thing to accomplish in technology is to keep things simple. There is invariably an inverse relationship between overt simplicity and the complexity needed to make it happen.
I believe SAP has the right CEO in Bill McDermott to pull off all of SAP’s grand plans. I will be keeping watch on SAP’s doings – primarily as those doings relate to enterprise mobility, but then, mobility now touches everything in the enterprise…
My money is on SAP (and its customers) to succeed.