July 19, 2007 5:38 PM
Posted by: JackDanahy
Earlier today, SAP released its Q2 2007 earnings results. Usually we leave coverage of that type of thing to the financial publications, but when we saw that some were expecting SAP’s profits to drop for the first time in three years, we figured we’d have a listen to SAP’s senior management roundtable.
As it turns out, SAP came out looking pretty good. Profits in Q2 were 449 million euros, compared with 415 million euros in Q2 of 2006. License sales checked in at 715 million euros, above the 676 million euro average forecast. For those interested, there are many more financial statistics in SAP’s press release.
Henning Kagermann also got into A1S a little more, saying we can look forward to learning the product’s real, market name, example customers and more details about the release schedule in September.
An interesting question that came up was if SAP expected its enterprise customers to see the on-demand A1S and say, “hey, we want that too!” Kagermann’s response was as vague as you would expect, but did give some insight:
Clearly we will leverage some of the innovations [of A1S] for large enterprise clients, as we leverage our experience from large enterprise clients in the set-up of the system because it’s a “suite in a box”… in our case, innovation goes top down and bottom up. So, you will see over time more and more how we are doing it, you will see more clarity at Sapphire. And, believe me, our large clients are pretty happy with the setup.
That comment seems to keep the door open for SAP ERP on-demand beyond the midmarket sometime in the future, right?
Robert DeSisto, a vice president at Gartner Inc., agreed that larger enterprises would be watching A1S with interest, and agreed with SAP that the original recipe A1S is not designed, or suited, for them.
“People in the higher end will want the usability and concepts that are used in A1S, but they will quickly see that this tool won’t work for them,” he said.
While the press conference lacked any of the thinly veiled shots at competitors that sometimes make these calls interesting, there was one question that generated a good quip from Kagermann:
Question: In what ways are you missing Shai Agassi?
Kagermann: “I’m missing him in my heart… but not in my business.”
July 18, 2007 4:25 PM
Posted by: JackDanahy
Just a quick follow-up on the previous posts SAP and H1B visas: What an H1B increase would mean and SAP, H1B visas and… India outsourcing its IT jobs… The Bureau of Labor Statistics recently released a report basically saying the IT industry is rocking with a super-low unemployment rate of 2%, way below the 5.3% unemployment rate seen in the 2003-2004 slump. The biggest winners: software engineers, IT managers, and network systems analysts. Straight-up programmers will continue to see their opportunities going overseas, however.
Judging by the official numbers, Bill Gates et al. are on the right track in advocating for an increase in H1B visas; skill shortages rarely help the industry or society as a whole. But then again, as some readers pointed out, more foreign workers mean less opportunities for U.S. greenhorns trying to get that first, crucial foot in the door. The balance between the two can certainly be debated, but let’s not lose sight of the good news at hand: Most American IT workers are gainfully employed with fairly bright prospects for the next couple years. That should count for something.
July 5, 2007 3:47 PM
Posted by: JackDanahy
We wrote about the increased crowding in the SaaS/on-demand space earlier this week, as NetSuite went public and announced ambitious plans to go up against Microsoft, SAP and others. But then there’s a financial detail buried in there that may play a role in SAP’s A1S plans even though it’s not immediately obvious.
As you know, putting the financial cards on the table is a key part of the IPO process. It turns out NetSuite, like Salesforce.com, is spending vast gobs of money on sales and marketing efforts. We’re talking well over 50% of revenue for SaaS vendors, versus 20-25% for traditional software vendors. InformationWeek’s Mary Hayes Weier summarized it pretty well:
Marketing and sales costs for SaaS vendors run high for a number of reasons. Because they’re typically pursuing small and midsize businesses that don’t want to pay high upfront costs for software licenses, a lot more outreach is required, both through online advertising and marketing and in person. SaaS vendors also spend money on not just marketing to new customers, but to replace those that have left.
That makes a lot of sense when you think about it. A Fortune 50 company or a public works behemoth has money to spend, and it won’t just jump ship at the drop of a hat. That’s SAP’s bread and butter right there. Now they’re going after considerably more fickle game. Of course, SAP has been chasing smaller fish for years through its Business One and All-in-One products, but A1S is seen as the big kahuna that’s going to bring SAP the 60,000-something new customers it needs to hit the 100,000-customers-by-2010 mark.
Is SAP equipped to handle this kind of churn? There’s a lot of smart people working at SAP so I’m assuming they’ve thought of this already in terms of customer support, retention programs and so forth. Of course, the biggest impact of the different models will be felt by the number jockeys on Wall Street; a profit-per-customer number based on Business One and All-in-One obviously won’t translate well to a considerably more expensive SaaS customer win. Let’s hope SAP manages those expectations as well, since investor backlashes rarely lead to good things for the company or its customers, and especially not the product line that triggered the backlash.
July 3, 2007 5:16 AM
Posted by: JackDanahy
SAP has officially responded to Oracle’s lawsuit. While a good chunk of the case remains bluster and hot air, according to SAP, chief Kagermann did raise some eyebrows by admitting certain “inappropriate downloads”. It’s worth noting, however, that SAP is taking great pains to isolate itself from its TomorrowNow branch. From the Brisbane Times:
[SAP] said its US subsidiary TomorrowNow had legally downloaded support documents from the website of Oracle but had also made “some inappropriate downloads of fixes and support documents.”
SAP stressed however that the rest of the group did not have access to the intellectual property downloaded by the US unit.
“What was downloaded at TomorrowNow stayed in that subsidiary’s separate systems. SAP did not have access to Oracle intellectual property via TomorrowNow.”
This is an interesting yet not entirely unexpected move, since it in effect seals the hatch between the main SAP ship and TomorrowNow’s leaking compartment. I’m no legal expert, but what I do know is that it’s too early to read too much into it. Yes, SAP could be preparing to jettison the whole thing (very unlikely). Or they could be working on a legal strategy that will end up with a sensible settlement (yes, that door has been nudged open again, despite initial assurances to the contrary). Or, it could be something as simple as PR damage control. If nothing else it seems like putting a neat little box around the problem might help preserve some integrity in the minds of the customers.
Either way, SAP probably has good reasons for keeping TomorrowNow at arm’s length until the dust settles.
Forbes reported that the SAP executive team were disappointed with Oracle’s aggressive litigation, arguing that it would have made more sense to come to them directly rather than get courts involved. Disappointed but hardly surprised, I bet, kind of like I’ll be disappointed but not surprised next time I fail to get a non-canned response from my Internet provider’s support site.
No, this is just too nice of a show for Ellison to pass up. I still believe he has little incentive to see this all the way through, but he’ll wring every ounce of fun out of it up until that point. Stay tuned for more as the story develops…
July 2, 2007 4:47 PM
Posted by: JackDanahy
, business one
SAP A1S, the new on-demand ERP solution we’ve been hearing about for quite a while now, is something of a tease when it comes to actual specifics. We know a few basic facts, like that it’ll be for the 50-500 user crowd, feature a try-before-you-buy option, and general tidbits about how industry-specific configuration will be a snap. Beyond that, there really hasn’t been much on the news front beyond some hemming and hawing about whether it’ll cannibalize the existing Business One and All-in-One markets.
Frustrating as the secrecy is (especially in combination with SAP’s continuous pre-hype), there’s little doubt in my mind that A1S will indeed make a bit of a splash when it comes out in Q1 2008… Or whenever the final launch will be. SAP is betting big bucks on this one, and most analysts agree it better be the silver bullet SAP thinks it is if the company has a chance of hitting the 100,000 customers-by-2010 mark. The move to an on-demand model may seem strange for a company like SAP, but it’s in line with the general SOA push the company has been espousing over the past few years.
That’s why this latest article from Computer Business Review Online caught my eye. Says Angela Eager in her article:
With its new release, NetSuite is moving up in the market, taking it closer to the SMB ground covered by SAP, Oracle, and Microsoft, through the addition of features designed to automate complex operations and make processes simpler for growing mid-sized companies.
In a nutshell, NetSuite, which registered for an initial public offering (IPO) today, is upping the ante with easier installation, multinational sales support and new BI functionality. Now, Ellison’s baby isn’t going to drive the SAP juggernaut into retreat anytime soon, but it does make the SMB space just a little more crowded.
We’ve written about the upcoming face off with Microsoft Dynamics before, and the ongoing war with Oracle is hardly news either. But what I want to hear is your take on the midsize market by this time next year. How do you see this playing out? Will SAP crush the midmarket with technical superiority, or will Microsoft sucker-punch the German giant with its many SMB beach heads? Will Oracle’s grand plans hit the big time?
Send your thoughts to firstname.lastname@example.org by July 10 and you’ll be entered to win an SAP book bundle:
- Succeeding with SOA, by Paul Brown
- SAP Enterprise Portal: Technology and programming, by Arnd Goebel
- Inventory optimization with SAP, by Marc Hoppe
June 12, 2007 6:40 PM
Posted by: JackDanahy
There is something both strange and ironic going on right now. Remember the heated debate about the proposed increase in H1B visas just the other week? Well, earlier today Mary Hayes Weier made some interesting comments regarding the IT talent shortage in India. Among other things, research firm Gartner has gone so far as advising Indian CIOs to — wait for it! — outsource IT work.
Yes, you read that right. At the same time as American IT workers are up in arms about a perceived army of cheap, foreign competition charging the castle Gates (sorry!), the very same Indians that tend to drift into the crosshairs are now looking to send their own IT jobs offshore. It’s an odd twist, to be sure. From Weier’s article:
There’s plenty of anecdotal evidence that shows India on the verge of a talent crisis [...] they start looking offshore, to Hong Kong and Singapore, for IT workers rather than fight for talent within their own country. The growing economy in India has created big IT budgets, yet India CIOs often can’t beat the big service companies like Tata and IBM at the recruiting game.
SAP career expert Jon Reed shared his thoughts on the initial H1B debate last month, so we figured it was time to check back in for an update on this latest development:
The irony of India soon having to offshore its own technical needs is a fascinating one. But how much does this really change the globalization of the information worker?
To get a handle on this story’s impact on the SAP market, we have to start with the assumption that offshoring trends in SAP follow a similar pattern to overall IT offshoring trends. Since the bulk of IT offshoring is done by large companies running either Oracle or SAP ERP platforms, this seems like a fair assumption.
So how does this news impact the SAP market? It’s a tricky question because the overall technical capacity across the world has not yet been fully leveraged by offshoring. However, this Information Week piece makes a good point: The cultural and language mix with India was perfect for U.S. based companies. Other countries may have the technical capacity but the cultural and language barriers might negatively impact the return on investment for offshoring.
Overall, I would say that this is good news in the short term for SAP consultants, in particular those based in the U.S. Any limits on the supply of qualified consultants means a corresponding uptick in rates is likely. But in the long run, as this author concedes, the
globalization trends are not going away. Ultimately, we are far from reaching worldwide technical capacity. It may take time to conquer some of the barriers, but I guarantee you there is a wave of entrepreneurs in Russia, Mexico, China and elsewhere working feverishly to do just that. I wouldn’t bet against them.
This means that the general advice I have always given SAP consultants about offshoring still holds: Try to avoid commodified skill sets, especially on the development side. Become indispensable by gaining a business process background, industry expertise, team lead experience, and crucial exposure to the latest SAP tools and releases. Yes, the offshoring question has gotten more complicated with India at capacity. But the long term trend of the globalization of the information worker is still in the adolescent stages. It will continue to grow, and functional work will eventually be impacted also.
There you have it: Potential short-term respite, but the worldwide globalization movement isn’t going to stop anytime soon. Use the time wisely — beef up your skills and make yourself outsourcing-proof before India increases capacity and/or other markets unlock the key to easier partnerships with U.S. companies.
June 8, 2007 3:50 PM
Posted by: JackDanahy
Most IT workers I talk to have trouble getting up to speed with Web 2.0. Isn’t it asking for trouble to start talking about Web 3.0 in that case? Apparently, SAP doesn’t seem to think so.
ZDNet’s Dan Farber reports a “dog and pony show” surrounding the opening of SAP’s new Palo Alto lab, where SAP execs predictably talked about stuff like the importance of collaboration, the upcoming SAP A1S ERP on-demand solution, and of course, Web 3.0. From Farber’s post:
“If you look to the services that we are defining with our enterprise SOA and things a bit beyond, we know that these type of enterprise services over time, in collaboration with many customers, associations and partners, a kind of standard can bring the Internet of business services,” Kagermann said. “We don’t have the semantics today that go beyond Web 2.0 and will allow software to to speak to each other.”
There’s the keyword: Semantics. The oft-cited example of Web 3.0 is a “smart” scheduling app that handles the eternal back-and-forth between meeting participants automatically. Problem is, beyond that, Web 3.0 is rather fuzzy. How can you look at a product and say: “This here piece o’ software is Web 2.0, while that app over there is Web 3.0″? More importantly, what does this concept really mean for SAP shops, and what practical benefits vs. costs are we looking at?
While not SAP-specific, David Siegel provides a pretty good explanation on his blog. Everything in the future will be smart, he says, not just scheduling apps but mundane stuff like chasing down the best flight (enter your preferences and let the computer run the two dozen searches on Orbitz). He also uses an example of a team of construction engineers working a lighting challenge to highlight the potential collaboration benefits of Web 3.0.
The key to getting there is enabling computers to interpret “human-readable” phrases rather make a loose guess based on just keywords. For a SAP shop, this could be a boon to areas like analytics and reporting, or bringing truly personalized CRM into the world. Other areas that could use a boost of “smarts” would be logistics, SCM, or pretty much any scenario where you need to tap into multiple heterogenous solutions.
That’s the benefit portion. Cost and maintenance remains largely an unknown at this point. Of course, time will tell how far these theoretical scenarios will play out in reality, but we’re going to dive deeper into this in the weeks ahead. Stand by for a comprehensive Web 3.0 for SAP overview by Eric Samuels!
June 7, 2007 10:39 AM
Posted by: JackDanahy
Did SAP steal Oracle’s customers? As in, nefariously done on the sly as opposed to, oh I don’t know, offering better products? That’s what you’d conclude if you believe the over-the-top aggressive amended complaint filed by Oracle the other day. But the reality of the case is anything but clear-cut. Dennis Byron, who has provided insightful guest columns on SearchSAP.com in the past, took a closer look at the issue in a recent blog post.
Byron raised a couple issues that deserve consideration:
- If SAP used old Oracle customers’ passwords to gain access to Oracle’s systems, why didn’t Oracle disable those accounts when the contract expired? Is it standard practice to leave the barn doors wide open for years, and then be shocked — shocked, I tells ya! — when someone comes by and takes a peek inside?
- After raising hell with the initial complaint, why, exactly, did the really nasty talk about “aiding and abetting” and “conspiracy” suddenly evaporate in the second filing?
Furthermore, Byron points out, the customers covered here (former JDE, PeopleSoft etc.) stems from a frenzied series of acquisitions that happened years ago. Back then, there was a lot of uncertainty for the new Oracle users, and SAP was more than happy to bring concerned companies into the safe SAP fold. But the lawsuit focuses on the past couple months, when the dust had been settled for quite some time. Why are former PeopleSoft and JDE customers bailing out now, 2 years after the acquisition by Oracle?
Interesting stuff for sure. Stay tuned as the case goes to court and, we would imagine, a solid return-salvo from SAP in the weeks ahead.
June 1, 2007 3:19 PM
Posted by: JackDanahy
Just when things appear to die down a little bit, the Oracle-SAP lawsuit always seems to bubble back up. Today it was Oracle stirring the pot, as it tacked on copyright infringement and breach of contract complaints to its existing suit of SAP’s TommorrowNow division (SAP TN) in San Francisco federal District Court.
The amended complaint, which now checks in at 51 pages, makes particular note of some alleged similarities between Oracle’s and TomorrowNow’s Daylight Savings Time fixes. Quoting from the amended complaint:
In at least one instance, SAP TN has also, publicly displayed, distributed, and thereby profited from Oracle’s copyrighted Software and Support Materials. In December 2006, Oracle developed a knowledge solution related to the recent early change to Daylight Savings Time (the “DST Solution”). The DST Solution is a narrative document with specific instructions for how to conform certain Oracle software to the new Daylight Savings Time change. Oracle fielded more than a thousand service requests from its customers related to the Daylight Savings Time change, and its DST Solution helped resolve more than 750 of them.
SAP TN’s “solution” is substantially similar in total — and in large part appears to be copied identically from — Oracle’s DST Solution. SAP TN’s copied version even includes minor errors in the original DST Solution that Oracle later corrected. SAP TN’s version also substitutes an SAP TN logo in place of the original Oracle logo and copyright notice.
It’s no secret that these two enjoy tweaking each other whenever possible, and the language used throughout the complaint is a prime example. It’s worth going through and reading it for yourself, but here’s one example:
It was not clear how SAP TN could offer, as it did on its website and its other materials, “customized ongoing tax and regulatory updates,” “fixes for serious issues,” “full upgrade script support,” and, most remarkably, “30-minute response time, 24x7x365” on software programs for which it had no intellectual property rights. To compound the puzzle, SAP continued to offer this comprehensive support to hundreds of customers at the “cut rate” of 50 cents on the dollar, and purported to add full support for an entirely different product line – Siebel – with a wave of its hand. The economics, and the logic, simply did not add up.
Oracle has now solved this puzzle. To stave off the mounting competitive threat from Oracle and to do so without making the requisite investment, SAP unlawfully accessed, copied, and wrongfully used Oracle’s Software and Support Materials.
The gloves have been off for some time. Now it seems the combatants are reaching for the Louisville Slugger. We will, of course, continue to follow the lawsuit as it continues its long, slow boil towards a conclusion.