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Posted by Andrew Bartels on May 27, 2010
TECH DEVELOPMENTS: I have been re-reading Clayton M. Christensen’s The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail in preparation for a session that Chris Mines and I are running on adapting to the Next Big Thing at Forrester’s IT Forum 2010.* Last week, I attended SAP’s SAPPHIRE NOW conference in Orlando, listened to co-CEOs Bill McDermott and Jim Hagemann Snabe, and met with McDermott along with other Forrester colleagues. The juxtaposition of the book and the event caused me to wonder: is SAP like one of the highly successful companies in Christensen’s book that failed to adapt to disruptive technologies? As Christensen noted, “the managers of the companies studied here had a great track record in understanding customers’ future needs, identifying which technologies could best address those needs, and in investing to develop and implement them.”
Everything that McDermott and Snabe said was consistent with these characteristics. They talked about how companies were facing a world of mobile, empowered customers; their need to be connected with each other to optimize the value chain through to the end consumer; the desire for new process flows; and the importance to them of fast decision-making. They identified a combination of on-premise, on-demand, and on-device solutions that SAP will be offering to meet these needs. They discussed SAP’s investments and new offerings in these areas, including its acquisition of Sybase for its mobile solutions and real-time analytics capabilities.
All of these statements are strategically sound if the technology changes that SAP (like other vendors) is facing – whether cloud computing in its various manifestations or Smart Computing as we have described – are “sustaining technologies” in the Christenson framework. Remember, Christenson defined sustaining technologies as ones that “improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued.” But what if cloud computing and Smart Computing are disruptive technologies? These are technologies that “bring to market a very different value proposition than had been available previously. Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use.”
Stefan Ried, a Forrester colleague who used to work at SAP, reports that Christenson’s book is must reading for all SAP upper managers. So, SAP’s leaders are aware of the difference between sustaining and disruptive technologies. But the announcements at SAPPHIRE suggested that either they view cloud and smart computing as sustaining technologies, or they are ignoring the risk that they are in fact disruptive technologies.
Here are things SAP didn’t say that supports this hypothesis:
In many ways, the SAP strategy laid out at SAPPHIRE NOW 2010 is a massive bet that cloud computing, Smart Computing, and related technologies like real-time analytics are sustaining technologies, not disruptive technologies. SAP could well be right. Software as an industry has not experienced the rapid cycles of innovation that hit the 1980s disk-drive manufacturers and provided so many compelling examples for Christensen’s analysis. Once companies have re-engineered their processes around the applications of a vendor like SAP, it is extremely difficult to switch to another vendor. So, software innovations tend, by force of customer inertia, to be sustaining rather than disruptive.
But, these new technologies could be more disruptive than SAP realizes. While companies will stick to their core ERP vendor like SAP for their core applications, they may well turn for SaaS solutions in new areas to vendors who have built these as SaaS from the ground up, not tried to rearchitect an on-premise solution to be a SaaS solution. And they may turn to a combination of smaller specialist software vendors and major services vendors for the vertical solutions that they will need to solve new business problems. Meanwhile, SAP will struggle with maintaining version consistency between its on-premise products with their long release cycles and its SaaS offerings with their frequent, regular updates.
*Clayton M. Christensen, The Innovator’s Dilemma – When New Technologies Cause Great Firms to Fail, Harvard Business Press, 1997, especially pages 98 and 99.
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