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SAP and its fragmented path to cloud glory
At first sight,SAP doesn't appear to have its cloud strategy mapped out but it's slowly finding its way argues Dennis Howlett
I may have said that SAP had a good year on the developer front. Unfortunately, that didn't include topics that could be bucketed as overtly cloudy. While some developers and customers referenced 'cloud' most of those conversations were in the context of mobile applications which commenters often see as a separate class of application - we can debate that point but for the purposes of this discussion let's take my interpretation as OK.
More pointedly, those steeped in the SAP world were wondering why SAP has such a tough time explaining its cloud strategy. This was a topic I discussed during this year's SAPPHIRE Madrid where I said that with solutions catering to so many constituencies, it is very difficult for SAP to articulate a strategy that looks coherent.
Over on the SAP Community Network, Dick Hirsch, who maintains a keen technical interest in this topic penned a detailed discussion, or rather laid out his thinking in a 15 minute video/presentation. His summary:
- Quick chronology of SAP’s cloud efforts
- The variety of solutions and its impact of cloud marketing
- The impact of the reduction of complexity
- The need to cover all layers
- Satisfying all constituents
- Organizational factors: The three gangs
First, Dick walked us through a timeline of SAP investments in cloud related technologies starting with ByDesign, moving onto the SuccessFactors and Ariba acquisitions and then finishing off with some of the more technical and HANA cloud related topics. It is a worthwhile effort since it clearly establishes why in his mind SAP has such a tough time. He illustrates this with linked context from people who are close to events:
I have been part of many of the same discussions and so I can easily see where he is coming from.
In the process, Dick raised some hackles by referring to the internal cultural problem of what he terms the 'three gangs.' These are the HANA, SaaS applications and NetWeaver Cloud 'gangs.' Again, I am not going to argue with his depiction of the problem as it currently manifests itself. In essence he says there are three competing groups inside SAP that while kind of rowing in the same direction end up tripping over one another or, are insufficiently integrated such that the company is able to present what should represent a coherent strategy.
A modestly informed outsider would look at this and perhaps argue that all Dick says makes rational sense. It is plausible and while illuminating, doesn't prevent SAP from successfully playing in the cloud space while it works through the issues he identifies. I take a different view.
As I read through Dick's analysis I kept coming back to the same question: Is there a cloud strategy in the first place and if so then is Dick's analysis representative of SAP's wrestles with the problem.
Compare this for example with Oracle and Fusion. Whatever you may think about the readiness or otherwise of Fusion as a cloud play, the fact remains the company has a strategy that is easy to understand. The same goes for Infor which, having spent years rolling up a rag-bag of technology vendors now has a clear message around what it is doing around cloud apps. SAP doesn't have that same positioning and I suspect much of that comes out of the way in which the company approached the problem in the first place.
When it first embarked upon Business ByDesign, the company got itself into a terrible pickle, delivering functionality that made sense at the business level but which made no sense at a technical level. The net result was that SAP had to go back to the drawing board and undertake a colossal amount of re-engineering.
To its credit, SAP got it pretty much right and today BYD is both credible functionally with plenty to commend it to the market it addresses. However, you get a sense of SAP's discomfiture when you realise that it has been through at least three major pricing shifts along the way. Is this a company that knows how to position its solution?
Then there was the SuccessFactors acquisition. No-one will ever convince me this was anything more than a defensive play as it saw Oracle focusing on Fusion HR and Workday readying to encroach upon its highly successful HR turf. That was compounded by what to me remains the ludicrous idea that the company could also take BYD, refactor it and then offer its piece parts as best in class as part of a loosely-coupled suite. I don't know anyone who truly buys that argument and I have yet to hear of customers aligning to that messaging.
Next we had the Ariba acquisition. I saw this as a way by which SAP could learn about transformation from the experiences of the Ariba team. Instead, the cloud elements of Ariba's story have become a side show as SAP positions the Ariba network as the 'jewel in the crown.' Does that sound like a play which helps bring together a coherent cloud strategy?
Then we have NetWeaver cloud - or Neo as it was formerly known. While the technology is undisputed as representing a good way forward for developers, constant questions about what's in or out at each release seem to have much more to do with internal political battles and less to do with taking forward a cloud strategy with which everyone can live.
Notice I have said almost nothing about HANA in the cloud. Why?
It seems to me that when you look back over SAP's history on the cloud topic it demonstrates the problem all innovators face at some point when they see a fundamental technology shift at a time when they are doing extraordinarily well. The way SAP has reacted seems rational in that it is building moats against competitors but it is doing so in a reactive and haphazard manner. SAP will argue that all decisions are thought through and that there is a long term strategy in place. SAP says it is all in on the cloud yet doesn't look that way when you realise that HANA, its current engine for long term growth, was not engineered for cloud.
How does SAP overcome this problem? As always in life I prefer the simple answers. If you believe as most do that cloud is the future it then becomes a matter of figuring how you bring customers with you on that journey.
This piece SAP understands very well. During conversations with Jim Snabe, co-CEO SAP, we discussed how SAP can relate to the 'core' of what matters to customers. Core will mean different things to different industries and SAP needs to roadmap all of those so that it can clearly articulate how it works going forward. In other words, it is no longer about buying technology (which is at the heart of Dick's broader argument) but about buying evolving solutions.
Having acquired or developed a huge amount of technology that theoretically could handle any problem a customer poses, it then becomes a matter of determining what fits where, when and how but without breaking the carefully engineered suite upon which so many customers rely.
Daft as it sounds given what at first glance sounds like chaos, I believe SAP is in a very good position to articulate how this works. The problem is that like many technology companies, it gets mired in the technology rather than fully understanding that technology is only an enabler. When it solves that problem internally then I suspect we will see a much more market-pleasing set of value propositions.