SAP Showcases Innovation at SAPPHIRE NOW, but the Future is Still Cloudy

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Last week I spent 3 days at SAP’s annual SAPPHIRE NOW conference in Orlando. I’d like to share a few observations on how I see SAP progressing to become a more nimble, innovative and customer-centric software company.

I’ve followed developments in the CRM industry since 1998. For me, SAP has always been a bit of a puzzle, partly due to its size and partly due to its core focus on ERP — which naturally made CRM and everything else secondary. But still, SAP managed to develop a competitive CRM suite and become anointed by analysts as a market leader by the mid-part of the 2000s.

That’s when I started investing time in newer developments in customer-centric thinking, like Customer Experience Management and Social Business. Meanwhile, the SaaS turned Cloud computing industry continued to accelerate while SAP appeared to sit on the sidelines. Waiting for what, I don’t know. An engraved invitation?

It seemed to me that SAP had been drinking too much of its own end-to-end process Kool-Aid, backed up by its large customers that were also slow to change. (This is the downside of Voice of Customer programs — they tend to support incremental changes to the status quo rather than spur disruptive innovation.) SAP either failed to grasp that these newer developments would help its customers be more competitive or didn’t think they could make enough money to be worth the investment.

Anyway, things started to change a couple of years ago, perhaps due to the wake-up call from the Great Recession. Since then, SAP has turned over management, increased emphasis on bringing innovation to market, and in general worked hard to get more in touch with current market trends. To my mind, this recent SAPPHIRE event marked a turning point where the company finally delivered on many of the promises it has been making over the past few years.

  • Leadership and Innovation: The Co-CEO team of Bill McDermott (in charge of the field organization) and Jim Hagemann Snabe (heads up product development) appears to be working well. Furthermore, CTO Vishal Sikka is engaged and leading new technology developments.

    Deeper in the organization, I hear SAPers increasingly talk about a more innovative culture emerging, supported by new solutions-oriented organizations and an emphasis on getting new products and services to market faster. All of this bodes well for SAP over the next few years, if it can keep its leadership team together.

  • In-Memory Technology: The geek in me has been intrigued by this development, which aims to move large enterprise apps from processing data in slower database technology, to faster memory. The product that makes this idea work is called HANA (High-Performance Analytic Appliance).

    For SAP’s largest customers, there’s a clear application for HANA to perform real-time analytics on “big data” — instead of waiting hours or days to get results back from a data warehouse. But over time this technology will make its way into business apps like CRM. And, it can make on-demand apps function (real-time analytics) and perform (end-user response time) better too — a differentiator SAP can exploit as it tries to make up for a decade-late start in cloud computing.

  • Mobile Enablement: To say mobile is hot is an understatement. The movement to smart phones, tablets and other devices is like combining Y2K with the advent of PCs. Because mobile users (employees and customers) using “smart” devices will demand that the enterprise apps they access be equally smart and adapt to the device. Not a fun time to be a CIO, but a great opportunity for vendors to add value.

    SAP’s acquisition of Sybase last year is now looking like a brilliant move to prepare for this shift. McDermott spoke of “empowering the front line” with applications that are increasingly mobile and analytical, and I think he’s right. The new Sales On-Demand application is one example where mobile support is built in, which should help increase adoption by sales reps.

  • Cloud Computing: SAP is finally embracing cloud computing, which is a positive development after years of naysaying and inaction. But currently I’d describe SAP’s efforts as tentative and defensive. Tentative in the sense that after having been burned by the initial release of Business By Design (ByD), the company appears to want to be extra extra extra careful of not making another mistake. SAP claims ByD has 500 customers and officials say the goal is 1,000 by the end of the year. So, NetSuite may finally have a competitor worth worrying about.

    But the new news is the pending (end of June) launch of Sales On-Demand, which is also built on the ByD cloud platform. The sales app is designed for mid-sized companies selling complex products. Sounds like Salesforce.com? Yes and no. SAP see Sales OnDemand as a solution for its customer base, to give reps something to sell when a department or division doesn’t want, or can’t wait for, an on-premise solution. No doubt this will help fend off Salesforce.com in some situations, but it strikes me as defensive. We’ll have to see (in 2012) if SAP really gets behind this product, which has a nice user-centric design and integrated collaborative features.

  • Social Business: At SAP, with the exception of StreamWork, social/collaborative features will enhance how an existing application works rather than being a standalone offering. Sales OnDemand is one example of where collaboration is an integral part of the application, not a bolt-on. Let’s face it, reps don’t care about “being social” except as it pertains to getting their job done — closing more deals.

    That said, I was disappointed to learn that collaboration will be limited to fully licensed Sales OnDemand users. Huge mistake. Even StreamWork enables free collaboration with those outside the core group, albeit with some limitations. And Salesforce.com makes Chatter available for free. Sales reps should be able to engage others in the organization in “light” collaboration without requiring a full user account.

The Future is Cloudy

To sum up, SAP is moving again and shows that a large software company can pick up the pace on innovation. HANA, analytics applications (Business Objects) and mobile enablement (Sybase) all look really strong as core pillars of the technology strategy going forward.

Cloud and social-enabled applications are, by contrast, relatively green and will need to be nourished in the upcoming months. As the economy picks up, it may be easy for reps to fall back on old habits and sell traditional on-premise solutions. But at least SAP has something to offer its customer base now, and perhaps will become aggressive after getting more experience.

Over the long-term, I think the Business ByDesign platform will evolve into a strategic platform for a large portfolio of cloud-based apps. This will help SAP compete better with both the SaaS pioneers (e.g. RightNow, Netsuite and Salesforce.com) and traditional competitors (e.g. Microsoft, Oracle). However, success will be more a factor of organization execution than raw technology excellence.

Further reading:
* Can SAP get back its CRM Mojo?
* Will StreamWork get SAP out of its innovation funk?

Disclosure: SAP invited me to attend SAPPHIRE NOW as part of its Business Influencer program, and paid my travel expenses. This post is not an endorsement of SAP or its products/services. SAP has been CustomerThink advertiser within the past year.

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