3 years in, 12 releases and Sapphire.

I joined SuccessFactors just before Sapphire in 2013. The 1305 release was pretty much baked, and I spent the first few weeks getting to know my new colleagues, and reconnect with those that I had known from my earlier times at SAP. Moving from talking about software as an analyst to being responsible for making sure SAP SuccessFactors built the right stuff was a steep learning curve, and one that I’m still on. I learn new stuff every day, and my curiosity has not been sated. I continue to make lots of mistakes, but hopefully not the same ones. I’m lucky to be surrounded by clever, determined and open minded people. That makes my job a lot easier.

At times it feels like yesterday, sometimes it feels like a century ago. Since the 1305 release, we have shipped the best part of 6000 enhancements. Some large, some small. Most of what we have built, we built it by listening to customers. This week, before Sapphire, we finalizing the 1608 build plan. The scope and scale of the build plan is far bigger than it was 3 years,ago and we continue to Kaizen (is that allowed as a verb?) the process, but we ask ourselves the same questions. Who are we building this for? Why? How can we simplify it, how can we make it easy to deploy?

As I was writing this post, I reflected back on what I wrote when I left Gartner, and I’m pleased to report that my expectations have been met. Over the last three years there have been many highlights. I think of sharing the stage with Plan, one of the world’s leading charities, or EC hitting the 1000 customer mark, the Brook Brothers moment, or seeing the next generation of leaders develop in product management team.

This year at Sapphire I’m looking forward to meeting partners,colleagues and prospects. We have a number of exciting announcements on the product side, and there is one in particular that I’m very excited about. More than that though, catching up with live customers is what makes these events worthwhile. Seeing Woolworths Australia, Timken, PepsiCo and several others on stage will make the trip to Florida all the more worthwhile.

There are many sessions going on, have a look here.

Some of the session descriptions a tad cryptic, but if you read the session details you will able to pick out the ones that work for you.

If you want to meet up at Sapphire, work through your account manager to set up a meeting, or ping me directly.

Employee Central Momentum

I had been meaning to write about EC momentum for a little while, and the press releases this week makes this week as good as any to do. Here is the juicy bit from today’s earnings announcement.

Human Capital Management Shows Strong Momentum

Customers are increasingly turning to SAP to manage their global workforce, both permanent and flexible. The customer count for SuccessFactorsEmployee Central, which is the core of our Human Capital Management offerings, surpassed 1,000 for the first time in the fourth quarter. SAP is winning against its key HCM competitors, especially in markets outside of the United States. For example, Lufthansa selected SAP SuccessFactors. SAP’s innovations in HCM will further increase SAP’s differentiation and drive market share gains.

Over a year ago, I wrote about the trajectory EC is on (Thank goodness for spellcheck, as trajectory remains a very awkward word to spell). 1000 customers. Sweet.

I’m writing this on way back from the sales kick off in Barcelona. It was fun meeting up with a bunch of happy and fired up sales folks and partners. I heard about successes in UK, Russia, Germany, France, Czech Republic, Portugal, Switzerland, and the UAE is totally rocking. Belgium too. It was especially nice to see the SAP South Africa gang. I’m expecting a gangbusters year from them.

The feedback on roadmap was gratifying, and it helped vindicate a couple of decisions we made last month. After a couple of days of tapas and sunshine, it is time to head back to Germany and focus back on the build plan for 1605 and 1608.

This morning on the plane, I thought about some of the EC customers that impacted my day in some way.

The coffee/s I drank, the toothpaste I used, my shaving stuff, the shower and sink manufacturer, my socks, my shoes, my jacket, the weather app I checked on, the phone network, the lenses in my glasses, the fridge in the hotel room, my briefcase, the elevator I took to the lobby, the tyres on the taxi that took me to the airport, the fizzy water I drank, the football boots worn by the dude that scored the goal in the Spanish league last night, the bolt holding up the roof in airport terminal, the yoghurt I had for breakfast, the shop I bought it in, airline that is flying me home, the satellite guiding it, the seat I’m sitting on, the publisher of the book I’ve just finished reading, and the maker of the guitar that David Bowie* played on the single I’m listening to as I write this. All of these companies run EC.

While it is great that the SAP press department has called out EC’s success in the press release and EC has featured prominently in the last couple of earnings calls, I’d like the mention the successes we are having with the other SuccessFactors products.

Onboarding is the fastest growing product in the portfolio, and has smashed every expectation. The feedback from the early adopters of intelligent services and the integration center is very encouraging. The multiposting acquisition is already gelling. I’m fired up to work with Simon and his team. More than ever, I’m convinced that we have the right approach and mix of organic and acquired innovation.

In the hotel in Barcelona last night I caught up with a start up partner, Enterprise Jungle. The CEO took a very early big bet on SuccessFactors extensibility with MDF and the HANA Cloud Platform, it was lovely to hear how that is now paying off. He explained how they are building a specialized offline and mobile performance management application with HCP for airline pilots to use, it enables them to rate the crew and other colleagues, then automatically syncs up with EC, Talent and even CRM. I also heard from Benefitfocus, Workforce Software and Docusign about the strong progress we are making together.

A few years ago, the early adopter customers helped us get this product off the ground. To all my colleagues, whether at SAP Successfactors or in the partner community, thanks for your dedication. You should be proud of what you have accomplished. More than anything, it is by listening to and learning from customers that we have achieved this milestone. There is still lots to do, but the trajectory remains on track.

 

*So long Ziggy Stardust, you made the world a better place. For Bowie fans, have a listen to this.

aSaaSination revisited

Jason Wood looks at the Netsuite IPO in some detail.

Given the dearth of attractive software IPOs, there’s little question that NetSuite will be a sought after issue and get banked by the top bulge bracket banks. But is it reasonable to expect investors to pony up a valuation similar to what CRM received?

I will leave the valuation to the experts, but I was struck by the size of the marketing and sales spend

In a filing with the Securities and Exchange Commission, the provider of on-demand enterprise-resource planning software reports solid revenue growth: from $17.7 million in 2004, to $36.4 million in 2005, and then $67.2 million last year. But up until last year, sales and marketing costs always exceeded revenue: $27 million in 2004, and $39.2 million in 2005. Last year, sales and marketing costs were $43.9 million, or 53% of revenue.

That’s not unusual. Salesforce.com’s sales and marketing costs, for example, typically hover between 50% and 70% of revenue, according to past financial statements. That’s huge compared to traditional software vendors where sales and marketing costs typically run between 20% and 25% of revenue

What happened to all of that bit of the creed where SaaS would be driven by viral user adoption rather than herds of sales people? 

Phil Wainewright picks up on the relatively high running costs

bigger problem for NetSuite though is its cost of revenues, which is what it spends on running its hosting operations and on professional services. When Salesforce.com had its IPO, it was reporting costs of around 18% of revenues (it has since risen to 24%). NetSuite’s costs were 34% of revenues in 2006, falling to just below 30% in Q1 2007. Unlike Salesforce.com, NetSuite doesn’t break out the professional services element of that figure, but that is likely to be the larger component and it’s difficult to see it reducing significantly in the near future since NetSuite has been targeting larger customers with more complex implementation requirements. Meanwhile, NetSuite faces higher hosting costs in 2008 as it plans to add a second hosting center — something that Salesforce.com already did a year ago

If marketing and sales are running at 53% of revenue, and the cost of running the system is at 34% then that doesn’t leave a whole lot over for R&D.

Those that challenge the “traditional” vendors ought to have a field day with these numbers. To paraphrase “Where is the innovation in the dollar invested if more than three quarters of revenue goes on sales and marketing and hosting costs?”

I’m not dismissing SaaS.  It is a very effective way of delivering applications, and by my reckoning it will become more and more important. It is already disruptive. Josh has a thoughtful look at Netsuite here. (Not sure about the iphone bit though)

Meanwhile, as disruption is looming in the maintenance side of enterprise software, NetSuite is heading to market with an on-demand ERP offering that tries to disrupt the key delivery model of enterprise software. Of course, NetSuite is just the latest in a list of disruptors, starting with Salesforce.com and SuccessFactors, and I have always felt that NetSuite is missing a lot of what would make it a truly competitive offering vis-à-vis the suite applications that it competes against.

But with the smart money pegging this as a potential billion-dollar IPO, the “on-demand ERP for the mid-market” disruptors are firing all over the market. And no where more strongly, and disruptively, than at SAP itself.

I refer, of course, to SAP’s much-vaunted A1S – the iPhone of enterprise software. This on-demand ERP system, which deploys in a fully-model driven way, is, in my opinion, a real NetSuite killer, once it hits the market. The demo I saw of A1S was truly impressive, and I believe that it will meet expectations when it hits the market later this year or early next.

SaaS isn’t magic though. You still need to sell and run it. Call me old fashioned but a bit of profit, or at least the hope of some isn’t a bad thing either.

 

Whatever happens with Netsuite and its IPO, we are in for interesting times….

 

 

 

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In defence of concrete

 Phil  Wainwright  recently picked up on a rather clever dig against ERP, putting up a picture of a concrete block, and equating it with ERP systems. 

At first I laughed and grimaced slightly.  I  thought about arguing about SOA  but then luckily I remembered a building architect friend of mine raving about concrete.

He eulogised about  how strong, elegant, durable, flexible, economical and beautiful it is.  It enables structures and forms that were previously unimaginable.  Construction costs are significantly lower because of concrete, and it comes in many forms.  Concrete is the backbone of modern construction, and it continues to evolve. 

(photo of the Humber bridge, courtesy of  Sunshine Hannan’s flickr)

 

Rush Hour on the Squinty Bridge

The Clyde Arc, also known as Squinty Bridge. (courtesy Colin Angus Mackay: his dayjob site is here.

True, concrete has spawned some monstrosities, but it produces structures and buildings that delight and revolutionise the way we live.

On the other hand putty: It fills hairline cracks.  Is great for children and artists or for taking imprints of keys in spy movies. It  is useful for keeping glass in place in old buildings, and has been used by Nick Park with great  success.   Also, unless you keep the lid on the jar it turns into a brittle blob. 

But software  architecture, like building architecture,  is more complex  this post makes out.  Stewart Brand’s pace layering deserves more attention.  Perhaps more on that another day.

Z is for…

Zoli writes a deeply  cool blog. It is a beguiling  mix of the serious and the silly.  He is a mine of information on SaaS cloud stuff and bizarre trivia.  Once upon a time he was an SAP consultant.

It was on Zoliblog  that I first heard about Zoho.  I have not paid much attention to alternative office tools.  I have Microsoft Word on my enterprisey IBM laptop and I’ve not felt the need to try anything else at work.  At home we use  Apple iwork and it does the job. I use Livewriter to write blog posts, as I found the wordpress.com editor prone to the occasional Great Harry Houdini moment.   Perhaps though, it is time to have a play with the office in the cloud.

Over on SDN,  Craig I never sleep Cmehil has started to document his experience of integrating Zoho and SAP.  (you need to read it all)

At this point I would normally have a captive audience of 3 or 4 people so I could spin off into a little experiment I had put together. The main idea of what I did was to demonstrate how easy it was to connect my NW04s system (the one running on my laptop – that blew some minds in itself) to Zoho. Now Zoho is the leading online office suite company who were the first to launch the complete package of office style applications as well as the first to offer full Sign on and now they’ve also launched an API.

Next time someone spins me the old old SAP is hard to integrate with lament,  I’ll point them there and here.   Apparently this is SOA.

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SAP Analyst event blogging

Most of the Enterprise Irregulars blogging coverage of this week’s  SAP analyst event was neutral to mildly negative.  Look at Dennis, Jeff, Jason, Dan.  I’ve had a rather busy couple of days,  so I’ve only the viewed the Webcast this evening. 

Vinnie commented as follows:

Reading the posts from SAP’s  analyst summit from fellow Irregulars – Dennis, Jeff, Jason, Dan  I think it may be time to embargo news for SAP also. It’s just lots of big ticket/low payback projects (SOA, Compliance, Duet), fixation (on Oracle), self-delusion (Shai saying SAP will have 10,000 customers on SOA by end 2007, compared to 400 today; Peter Graf suggesting  there are no integration costs around SAP. News to SAP’s not-so-small SI ecosystem).

Like Mark, I hope Vinnie continues to blog about SAP, even if he does  knock us. It is good to have the dialogue.   I don’t think that he does the event justice though. Look and  listen yourself and make up your own mind.   

It seems to me that Josh Greenbaum went to a different event.  He is really positive.

In the category of overall market leadership, SAP took the biggest leap of all, and landed squarely in the process. On the morning of the second day of the conference, SAP’s Peter Zencke unveiled what the company calls a “SOA by Design” platform that effectively will let a mid-market company switch on or off a select set of processes that in turn will yield a pre-configured MySAP system. To answer one of Dennis Howlett’s questions, this will in turn be potentially available in SaaS mode, which of course is exactly what the mid-market would love to see. The Zencke demo was definitely a live demo, running on a system back in Waldorf, and complete with a “server not found” error message. But it had the right effect: highlighting not only SAP’s ability (thanks to its partnership with IDS Scheer) to model complex business processes in a SOA environment, but also showing that, underlying the theory of SOA and the theory of model-based deveopment are some very serious and extensive business processes that SAP owns and can deliver to its customers’ advantage.

It is a pity that the second day isn’t on line yet. I hope the analyst relations folks stick it up soon. I’d like to watch the Peter Zenke  demo. (I’d guess that having board members that have a passion for and deep grasp of code  is a whole lot better than being run by investment bankers.)

The mid-market project has been called A1S internally, and mentioning outside SAP  was theoretically taboo.   It is a relief now that the A1S story is now out in the open.

The blade centre model is a take on SaaS that some of the SaaS priesthood will deem impure, but I think proof will be in the delivery. 

Now the  “go to market story ” must come together.  Many of brightest developers here at SAP have been working hard over the last couple of years, it is now time for the marketing folks to do their job. I hope the messaging will be simple and compelling. The product will  be.  I have seen it and it rocks.

I do worry that we have a tendency to overly focus on the recipe  and not on the meal. 

Jason also covered the Citigroup’s Thill & AMR talk software session.  Lots of positives for SAP there, and some key things we need to focus on.

Bruce cautioned that SAP and Oracle need to do a better job at articulating the value proposition of their new SOA-based platforms, because many customers remain unclear about how the technical aspects of the new platform really benefit them in terms of improving business process.

Bruce and Shep agreed that it all comes down to SOA and converging the marketing hype with business value to customers. Both Oracle and SAP are spending a ton of marketing dollars and messaging on SOA; yet their customers remain very confused and unclear about the value proposition.

In a recent note Jim Shepherd commented

One of the best indications of a technology maturing is the vendors finally stop talking about it. We may finally be reaching that point with service-oriented architecture (SOA).

I’m hoping that we stop talking about SOA, and just show the applications that use it. 

 

Definitionitis

I wonder if back in the time of Gnaeus Flavius they had heated debates about the meaning of legal terms, and had bragging rights as to who came up with the catchy phrase: Cui testimonium defuerit, is tertiis diebus ob portum obvagulatum ito. (One who seeks the testimony from an absent person should wail before his doorway every third day) . 

The blogsphere is awash with definitionitis.  Web 2.0, SaaS, Enterprise 2.0  I’m also infected, but Nicholas Carr has it really bad.