Many of you will be in the midst of a negotiation with SAP at the moment, because SAP does about 40% of its license deals in the October to December quarter. It’s a sourcing cliché that software companies give their best discounts at their fiscal year end, but just because you are making a purchase in month 12 doesn’t mean that you are getting a good deal. I see a lot of SAP proposals and contracts, and I’m often surprised by the gulf between the actual deal on the table and what I would consider to be an acceptable proposal – one that sets the relationship up for mutual success, balancing price, flexibility and risk.
Buying software from powerful providers such as SAP is very different from buying hardware, services and non-IT categories. Unfortunately, many sourcing professionals seem to think that they’ll look weak if they engage expert help to coach them during a negotiation, but it isn’t a question of haggling skills, it’s a question of deep, current market knowledge. Unless you have that, you risk:
At a recent SAP customer event on Business Transformation, Alexander Budzier from the Said Business School at the University of Oxford presented findings on IT project outcomes and their correlations with various project factors. When determining project success rates, the researchers considered business benefits, adherence to budget, and on-time delivery.
Interesting findings from this research include:
Project success does not correlate (or very minimally correlates) with size or length of project, or with public versus private sector.
Focusing on one goal too much can have a negative effect on other metrics. Consider the extreme example of the Olympics, which had a 100% on-time result (over 10 Games analyzed) but the highest cost overruns, at an average of 207%!
Agile deployments (versus big bang) had greater success in some metrics, particularly schedule adherence, but not all.
The single biggest factor in determining project adherence to budget and timelines was benefits management. (In this research fewer than half of the projects they studied had actually tracked benefits.) Those who focused on measuring benefits significantly reduced BOTH project cost and schedule risk. Project cost overruns averages decreased from 36% to 6% when focusing on business benefits; schedule overruns decreased from 119% to 51%.
So, what can we take away from this? Project leaders should:
Focus on benefits – throughout the project lifecycle. Benchmarking can help leaders to identify what benefits / metrics to track.
Recognize warning signs / risks early -- and address them before they result in disaster. These risks include unknowns in design, organizational resistance, and shifting project requirements.
At its annual Energy Analyst And Sourcing Advisor Event in Berlin, Deutsche Telekom/T-Systems re-emphasized its commitment to service the energy sector with a dedicated offering. Over the last three years, Deutsche Telekom has spent significant resources in building up expertise to become a platform and service provider for the utility sector. Our main observations during the event were that Deutsche Telekom:
Two months ago, SAP announced their intention to acquire Hybris and back then I blogged about the potential implications for Forrester’s clients. Today, SAP has formally completed the acquisition, which brings further clarity for the road ahead:
Hybris will operate as an independent business unit. Hybris will operate as an "SAP Company" rather than a "Product of SAP” and will retain its existing sales and development teams. This is a positive move for existing and future Hybris customers and ensures that the Hybris solution will continue to remain agnostic of other SAP products and technology. For now there will be no bundling of products, Hybris will not become part of the ERP or CRM suites or vice versa, however on the SAP side of the house there will be development in building lightweight ‘connector’ integrations for those customers that want to run Hybris alongside an existing SAP ERP or CRM infrastructure.
Customers will be able to buy from SAP or Hybris. In the near future, the on-premise edition of Hybris will become available on the SAP price list. For existing SAP customers looking at Hybris, this will give them the flexibility to contract directly with SAP and leverage their existing master service agreement. Given that Hybris will be available through both the SAP and Hybris sales channel, customers should expect price parity - it is unlikely that SAP reps will have much leeway to apply deep corporate discounting when selling Hybris.
For the past ten years, the major IT initiative within Chinese organizations has been service oriented and/or process driven architecture. The pace of change has been slow for two reasons: 1) From an end user perspective, related business requirements are not clear or of high priority; 2) more importantly, solutions providers have not been ready to embrace technology innovation and meet emerging technology requirements through new business models.
Times are changing. IBM and other major ISV/SI in China (as well as end users) are driving momentum around emerging technology, such as cloud and enterprise mobility. I recently attended the IBM Technical Summit 2013 in Beijing from July 11 to 12. Here’s what I learned:
Telecom carriers supported by technology vendors will accelerate cloud adoption by SME. Contributing to more than 60% of total GDP in China, small and medium enterprises (SMEs) have always sought to simplify their IT operation as much as possible, and at the same time scale it up when business expands as quickly as possible. IaaS solutions appear to be a perfect match for SMEs; however IT professionals have concerns about the security and data privacy over the operations by other companies.
What typically happens when one approaches 40? Major mid-life crisis? Life transformation? Yeah, something like that...
Well, apparently tech vendors are no different. Back in 2010 with 40 rapidly approaching, SAP undertook a broad new innovation strategy with an executive mandate for intellectual renewal. The goal was to transform the company through innovation – innovation that would reach billions of new users and humanize the brand through consumer app development. What?! SAP, a consumer app company. Yes, observing market trends of consumerization and the rise of “shadow IT” (technology purchases outside of the IT department), SAP recognized the need to expand its audience and improve its user experience.
They began with three questions:
How can we create applications that can potentially reach millions of users?
How can we design, build, and release these apps in 90 days?
How can we scale this to successfully deliver large volumes of these apps?
I recently had the opportunity to spend some quality time with NetSuite in San Jose at its customer forum — SuiteWorld. The event gave me a long, overdue deep-dive into their current strategy and the chance to speak with many of their customers one-on-one.
The big announcement from the event was the availability of its manufacturing solution. The evening before the event started I had a good conversation with our Sourcing Analyst Liz Herbert — who spends a lot of her life focused on the SaaS providers — and asked her why NetSuite was not growing more quickly. Her response was that its lack of a manufacturing solution is partly to blame. So when it was announced by CEO Zach Nelson the next morning, it certainly helped to fill me with confidence about its future.
After repeated false starts of trying to build its way into the enterprise eCommerce space, SAP has finally decided to do a U-turn on its strategy and buy its way in. For years there has been intense speculation that SAP might acquire hybris, and behind the scenes there has certainly been much umming and ahing over the enterprise software giant’s commerce strategy. Hybris has been on a tear recently, and until today was widely expected to file for an IPO in 2014; however, the firm’s destiny has for some time been in the hands of its VC investors (Huntsman Gay Global Capital, Meritech Capital Partners and Greylock Israel). The decision to sell to SAP was likely influenced by these VC firms who, between them, have a controlling state in the firm. The value of the acquisition has not been disclosed, but given hybris’ strong earnings over the past four quarters (the bulk of which was directly from license revenues) and with the looming path of an IPO, we can speculate that SAP paid a substantial price tag — although the terms of the transaction are likely complicated.
So the big surprise is not why, but why now? There is no single answer to this question — but we can look at the factors that have increasingly piled on the pressure for SAP to change direction and pull the trigger on this acquisition:
Channel partners are bullish about their growth prospects. In fact, in a recently conducted Forrester survey in North America (NA) and Europe, 59% of channel partners expect to grow by more than 10% in each of the next two years. However, partners will need help and handholding as they aim for greater sophistication and higher growth targets, especially around cloud based services. Forrester research indicates that three-quarters of channel partners in NA and Europe now sell cloud-based solutions (up dramatically from two years ago). These solutions now make up 26% of their overall revenue, a percentage they expect to increase in coming years.
In my recent report, Seeding the Cloud Channel, I highlight three key areas where the partners will need support from both their tech vendors and their distributors:
Diagnostic tools and services to assess current maturity and set a transformation road map. Partners will first have to collaborate with their principal vendors to gauge the fitness of their organizations for an annuity-based business model — and whether they can sustain that model in long run. Vendors need to create assessment tools to evaluate their partners' business model transformation potential. For example, Cisco Systems built its OnPlus ROI Tool expressly for partners to model the myriad business model options and scenario decisions they face. This will not only help partners identify their pertinent strengths and weaknesses, but will also help them plan their future growth strategy.
When I returned to Forrester in mid-2010, one of the first blog posts I wrote was about Oracle’s new roadmap for SPARC and Solaris, catalyzed by numerous client inquiries and other interactions in which Oracle’s real level of commitment to future SPARC hardware was the topic of discussion. In most cases I could describe the customer mood as skeptical at best, and panicked and committed to migration off of SPARC and Solaris at worst. Nonetheless, after some time spent with Oracle management, I expressed my improved confidence in the new hardware team that Oracle had assembled and their new roadmap for SPARC processors after the successive debacles of the UltraSPARC-5 and Rock processors under Sun’s stewardship.
Two and a half years later, it is obvious that Oracle has delivered on its commitments regarding SPARC and is continuing its investments in SPARC CPU and system design as well as its Solaris OS technology. The latest evolution of SPARC technology, the SPARC T5 and the soon-to-be-announced M5, continue the evolution and design practices set forth by Oracle’s Rick Hetherington in 2010 — incremental evolution of a common set of SPARC cores, differentiation by variation of core count, threads and cache as opposed to fundamental architecture, and a reliable multi-year performance progression of cores and system scalability.