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SAP: What went wrong? Blame marketing, NetWeaver

SearchSAP.com site expert Axel Angeli isn’t one to pull his punches when it comes to SAP and he makes no exception in discussing SAP’s recent earnings in this guest blog.

SAP has seen better times. The company’s quarterly revenues have declined and SAP is tightening its belt accordingly. What’s really to blame for the tension in Walldorf?

Deputy CEO Leo Apotheker blames the financial crisis. This is an attempt to avoid mentioning the turmoil ignited by the raising of annual SAP service fees from 17% to 22%. Customers haven’t shown the least bit of understanding for this decision. As a consequence, many customers have put their SAP purchases on hold. For example, the German SAP User Group (DSAG) decided in a common action to withhold any SAP purchases until next year.

The new enterprise support is a marketing disaster. The way it was communicated left the impression that SAP makes decisions behind the backs of its customers. Since Apotheker is the SAP marketing guru, he has turned into a burden for all of SAP. There is no one he can blame for this unfortunate move, and I have no idea how Apotheker will be able to escape from this trap. I myself am a techie and therefore feel indifferent towards Leo Apotheker; he is simply not my kin. But the analysts, also, do not seem to like him very much, which makes it difficult for him to explain his position. If this mishap would have been linked to Henning Kagermann, he might have escaped with a simple “Sorry, we meant it differently!” But the contract of the congenial, bright-minded professor is ending soon and he seems to be partially retired, like many of the old SAP crew. 

The explanation given by SAP for the steep increase in support fees is the same old story: Due to the increasing complexity of the full NetWeaver stack, the costs invested by SAP into support rose heavily and now need to be recouped. Customers see it differently. The higher costs stem only from the new dimension of components that SAP introduced in the past decade, against customer wishes.

High support costs and a high frequency of support requests are signs of low quality or a depreciation of support-friendly design. And the same products that have been under fire for years have caused the problems. These are the products that require the Java stack, with the biggest culprits being Enterprise Portal (EP) and Process Integration (PI). PI is awkward to use, costly to install and operate, difficult to examine for causes of malfunctions and no longer based on state-of-the-art Enterprise Service Bus technology. There is no time to pimp up PI into a full featured, modern Event-Driven-Architecture process engine.

In part two of this blog, Axel Angeli discusses ways for SAP to get back on track.

SAP’s Bill McDermott offers growth clues

Are there acquisitions in SAP’s future?

SAP’s Bill McDermott told SearchSAP.com last week that “…there are many ways that we can grow with our existing accounts.”

The president and CEO of SAP global field operations said SAP can still sell customers more of the SAP suite — such as CRM and SCM, as well as third-party partner products like Duet or Adobe forms.

He also pointed to a recent acquisition this quarter, “Visiprise, which is a small company that essentially provides what we call the perfect plant, how do you make a manufacturing plant more efficient and effective at the operating floor level?” McDermott said. “So these are all ways that we can grow existing accounts.”

It’s the potential acquisitions that have some people talking.

AMR’s Bruce Richardson, brought it up in his First Thing Monday newsletter. SAP’s move to fill top roles with field executives, not developers, signals that SAP will buy more companies rather than trying to develop everything internally, he wrote.

Forrester Research’s Paul Hamerman shared similar thoughts with SearchSAP.com in a previous interview about ERP market share growth.

“It’s a very possible strategy for them to get into the underdeveloped markets,” he said. “China is a very interesting market and one that would lend itself to some acquisitions.”

With regard to the top management, McDermott told SearchSAP.com that they model their management team after the markets they want to compete in.

“What we try to do is have a very diverse management team. So their cultural priorities look a lot like the markets in which we compete,” he said. “And I think that makes a difference, instead of a command-and-control style coming from one state, in one country.”

Will you be buying more from SAP, or will SAP be buying more companies?

Courtney Bjorlin, News Editor

Most popular SAP skills

The topic of SAP skills has been a hot issue of late. For those interested in this topic, the U.K.’s ITjobswatch provides a list of the most popular SAP skills and other data that will be very pertinent to the average SAP Web developer, software developer, and consultant. Here is a sampling of the most interesting data, with the rest available here:

SAP Application Development

1. SAP XI
2. SAP Basis
3. .NET
4. J2EE
5. XML

SAP Business Applications

1. SAP FI/CO
2. SAP HR
3. SAP SD
4. SAP CRM
5. SAP MM

Programming Languages

1. ABAP
2. SQL
3. Java
4. SAPscript
5. C#

Processes and Methodologies

1. ERP
2. BI
3. CRM
4. Project Management
5. SAP Implementation

Although this data pertains to the U.K., both the maturity of that market and the sample space of the survey suggest that it may also reflect conditions in the U.S. market.

Demir Barlas, Site Editor

The end of IT

Everyone knows about the bottom-up pressure on in-house IT — namely, that IT outsourcing has made it cheaper and more efficient to move basic functions such as maintenance and testing outside the four walls of the enterprise. After ten years, this can’t be called a trend anymore; for enterprises, it’s now a best practice to move tactical in-house IT employees elsewhere, whether to an IT outsourcing partner or to a captive center offshore. After all, most enterprises are not in the IT business, and especially not in the tactical IT business.

There are plenty of signs that there is top-down pressure on in-house IT as well. In three separate conversations — with consultancy Sapient, and with SAP executives Zia Yusuf and Richard Probst — we’ve heard that the top tier of IT discipline is going to be changing is well. This isn’t just an abstract notion; SAP and its partners are engineering real products in such a way as to change the discipline.

The change afoot is that higher-level IT people will have to gain increasing knowledge of business processes. To put it another way, t he business-IT war is over and business won. From now on, IT will have to speak the language of business.

SAP’s products are taking on a process-centric hue, with workflows, continuous refinement, drag-and-drop modeling, and other aspects of business process management. No matter how abstruse the technology at the core of these products, they speak business language and are designed to be usable by process experts, not coders.

As cyberpunk author William Gibson famously said, the future is already here, but it isn’t widely distributed yet. When we talk to people who used to refer to ‘IT departments,’ we are beginning to hear about ‘centers of business enablement,’ ‘process competence,’ and the like instead.

To IT people: learn your code, but remember that you have to learn the language of business processes. The old-style IT department is dead.

Demir Barlas, Site Editor

SAP Argentina: A hot opportunity

One of IT’s most frequently asked questions is, “How can I turn SAP knowledge into money?” The answer to this question typically involves becoming a consultant or systems integrator employee. However, SAP itself offers a limited number of employment opportunities for everyone from developers to business-level consultants.

An interesting trend in SAP’s employment practices is the way in which smaller countries are becoming hotbeds of SAP hiring activities. Consider, for example, Argentina, where SAP is currently trying to fill 36 jobs. For Spanish-speaking SAP career aspirants in position, these are plum opportunities — some of which have been listed as open for several months, perhaps indicating that SAP has had trouble filling them. This is an interesting situation because, as some you may know from experience, it is much rarer to find SAP positions that remain open this long in the United States or Western Europe.

Some of SAP Argentina’s jobs don’t even appear to require a knowledge of Spanish, as they are posted in English (other job notices are in Spanish only, or in English and Spanish). Potential applicants, take note!

Demir Barlas, Site Editor

SAP and Microsoft in talks?

Yesterday, rumors surfaced that Microsoft was in talks to acquire SAP. The news bumped SAP’s shares up, and notched Microsoft’s down.

Of course, in 2004, the antitrust case surrounding Oracle’s acquisition of PeopleSoft revealed that SAP and Microsoft had briefly and unsuccessfully talked about merging.

As luck would have it, SAP CEO Henning Kagermann was in Boston today for the SAP Influencer Summit to give a keynote and hold a press conference. When asked, point blank, whether SAP and Microsoft had discussions about a possible acquisition, Kagermann responded with a quick, definitive “no.”

So, this time it appears the rumor was just that.

Jon Franke
News Editor

The skinny on SAP SRM 2007

There has been something of a slow burn recently on a couple good blogs about SAP SRM 6.0. The word around is that the product, also referred to as SRM 2007, won’t be released beyond those customers currently in the ramp-up phase. Obviously, this isn’t great news for SAP, but how bad is it?

To clear some things up, we talked to Andrew Bartels, an SRM (supplier relationship management) analyst with Forrester Research.

SAP says between 10 and 50 companies are in the ramp-up phase for SAP SRM 6.0 (Bartels puts that number closer to 10 or 20). Bartels said these companies will be able to continue implementing the product, but SAP will not be taking any new customers. Rather, the idea is that SAP will focus on getting SRM, SCM (supply chain management) and all its “alphabet soup” products on SOA (service-oriented architecture) by the fourth quarter of 2008.

So, is this a disaster for SAP? Not according to Bartels.

On the plus side, the SRM 2007 product itself doesn’t have a lot of new features and functionality, according to Bartels. Rather, most of the improvements were in usability, and SAP may have some service packs in the offing to help in that area.

SAP will also continue developing the areas that have needed the most attention — spend analysis, CLM (contract lifecycle management) and e-sourcing — all of which will be available for sale separately.

However, with the next SRM product now likely debuting in the fourth quarter of 2008, that puts a large two and a half year gap between major SAP SRM releases. Also, some customers were counting on the usability improvements and will be disappointed. But we shouldn’t expect a mass customer exodus for SAP, Bartels said.

The bottom line?

“This is not good for SAP,” Bartels said. “But it is not, by any means, too bad for them — they still have competitive products out there.”

Jon Franke
News Editor

How will SAP’s BO acquisition impact SAP BI consulting?

In this two-part guest column, veteran SAP expert Jon Reed sounds off on the recently announced Business Objects acquisition.

Coming back from TechEd Las Vegas, we were all taken by surprise when the big TechEd announcements were trumped by the news of SAP’s Business Objects (BO) acquisition. This purchase was a major development for many reasons, not the least of which was because it marked a significant shift in SAP’s “build, don’t buy” development strategy. The biggest question off the bat was a simple one: Is this a good or bad move for SAP?

Matt Danielsson’s Editorial Blog ran a series of entries which provided a very useful assessment of the pros and cons of the BO acquisition. Featured among the entries was Naeem Hashmi of Information Frameworks, who provided a well-balanced look at the impact of the BO purchase.

After Matt posted his initial features, a follow-up question appeared: How will the BO acquisition affect SAP: How will the BO acquisition affect SAP consulting in the BI/BW area? To get a handle on this issue, I asked Naeem Hashmi to share his thoughts on the impact of BO on the careers of SAP professionals. I then placed his comments in an overall context of how I look at the issue myself. Here is what I had to say:

Almost as soon as SAP’s acquisition of Business Objects (BO) was announced, the emails started pouring in. All kinds of SAP consultants, including those who were seriously involved in BW/BI or those who were looking to get involved, were concerned: How would this acquisition affect their career path? To be honest, I never truly understood these concerns.

Let me clarify: I do grasp that the BO acquisition poses some potentially dramatic changes in the SAP BI consulting space. Certainly the “skills profile” of the BI consultant of the future will change as a result of SAP’s BO purchase. But I saw the BO acquisition, which was a major departure from SAP’s “build our own code base” strategy, as a signal of the strategic importance of BI to the product line. And that can only be good news to the SAP BI consultant in the long term.

This certainly jibes with the sense I got from TechEd 2007. On the lookout for hot skills, what I saw was that the “eSOA skill set” would eventually be very much in demand, but right now, BW/BI skills were considered the most sought after of any skill, certainly any technical skill.

So it’s hard for me to see a serious problem for BI folks here – if anything, the BO purchase indicates the huge value SAP sees in BI going forward. And that means that SAP’s own customers are committed to implementing this technology. SAP would not have gone after BO if they had any doubt about that.

In order to get a better handle on how BO will truly impact SAP BI consultants on the skills level, I asked Naeem Hashmi, Chief Research Officer of Information Frameworks, if he would like to share his take on how the BO purchase will impact SAP professionals.

Read his thoughts on the matter in part two of this column.

SAP’s BO acquisition impact on SAP BI consulting, part two

In the first part of this column, guest expert Jon Reed expressed confidence in the future job prospects of SAP BI professionals. But what does our other expert voice on the Business Object acquisition think? Jon Reed sat down with Information Frameworks Chief Research Officer Naeem Hashmi for a job growth reality check.

“From an SAP BI professional growth perspective, SAP’s acquisition of Business Objects (BO) brings a great opportunity,” Hashmi said. “Business Objects offers a superior and flexible presentation environment. However, whether the back end ends up being BO, SAP BI 7, Oracle, MS SQL, DB2, etc., you still need data warehousing skills to construct a data access environment regardless if you use the SAP BI or BO front end. For that reason, if I am an SAP BI consultant, I do not worry about the BO acquisition by SAP. If I was only a BO consultant, I would be concerned, however.

I see greater hardship for BO consultants learning and becoming fluent in SAP BI. Under NetWeaver, BI training and skills are very important. SAP BI consultants will find it much easier to learn BO and become fluent in BO technology quickly.

Note that the heart of BI usage is not really the technology, but the business side of “business intelligence” and here is where I see the BO acquisition will bring a wide array of good knowledge about building user-friendly business intelligence solutions into SAP (and to SAP BI consultants).

I do not see much of an impact of BO on SAP BI consultants. SAP BI is going to grow. Perhaps there will be a robust RFC (or other high performance data exchange method) to build BO universes automatically, and synchronize them easily from a backend SAP BI broadcaster or other method.

This way, enterprise BI users would still enjoy access to clean SAP and non-SAP data and have the ability to analyze data through a powerful BO user front-end using local universes. At this point, the SAP-BO integration plans are still on the drawing boards, so we’ll have to see how the future BO roadmap will evolve towards disappearing within the SAP Solutions. But at this point, the outlook for SAP BI consultants looks promising.

So what can an SAP BW or BI consultant do to prepare for the SAP BI profession for the future?

1) Take some BO training for your short-term competitive edge. Learn the business intelligence language of non-SAP business users. SAP BI consultants need to become “enterprise bi-linguals.” Learn the BO Data Integrator (which is the Acta ETL tool), which could eventually become the SAP ETL tool for non-SAP data sources without coding ABAP.

2) Get some training in Enterprise Architecture (EA). This will help you understand the actual business processes that span across SAP and non-SAP solutions, how people use information and when/how/why they make decisions that pertain to the BI side. You will be a better BI consultant with some EA understanding, and this will enable you to diversify your profession as well.

3) I would also suggest BO consultants start learning SAP BI and get used to the SAP BI lingo. The BO universes will disappear from the SAP universe sooner than you may have imagined. Prepare yourself with SAP BI.”

I think Naeem has summarized this situation well, both in terms of the big picture of SAP BI and the next steps SAP consultants can take. In addition, he’s shared some useful pointers for BO experts in the midst of this big corporate changeover.

However, there is one other aspect to consider, which Naeem brought up in his original SearchSAP commentary on BO:

“The bad news is, we’re now seeing a momentary confusion among SAP BI customers and consulting partners. We have many different products with different infrastructures, usage and life cycle management environments. Just a few month back SAP acquired OutlookSoft, a corporate performance suite, and before that we saw the Virsa acquisition.”

This is an important point. Naeem is correct that the BO acquisition has definitely created some short-term customer confusion, for understandable reasons. It’s possible we could see the immediate demand for SAP BW/BI expertise go down as SAP customers put the breaks on certain BI initiatives until they determine the best way forward, what their BO options are, and how the two frameworks will be integrated.

However, there are so many ongoing BW and BI projects, covering so many different kinds of initiatives, that I don’t expect a big adverse impact on BI consulting demand. For consultants trying to break into SAP BI, this may create yet another avenue, by mastering the tools on the BO side and approaching SAP from that direction.

The confusion we see in the shorter term about BI should be cleared up for the longer term. I expect in the end, we’ll see even more demand for BI consultants as a result of this acquisition. It’s never ’smooth sailing’ with SAP for any consultant, and the BO acquisition could create some choppy waves for some, and make it a little harder for junior-level BI folks to push ahead. But I see some promising shorelines ahead for the BI consultants who realize that this development is, more than anything, a recognition of the strategic value of their work.

As SAP shifts from a transactional system to a business process platform that leverages transactional data, BI is in a crucial product position. That strikes me as very good news for the BW/BI consultant.

Bottom line: SAP BI professionals have little reason to worry, but Business Objects experts would be wise to start cracking the SAP books sooner rather than later. Do you agree? Are there factors in play Reed and Hashmi are missing? We want to hear from you — please send your comments to mdanielsson@techtarget.com, where one random submitter will receive a free copy of “SAP System Landscape Optimization” courtesy of SAP Press.

Matt Danielsson
Editor

RFID rising — and drawing fire

RFID, radio frequency identification, is one of those topics that come and go in the news. Unless you’re working with supply chains on a daily basis, RFID may not be at the top of your IT watch list. Well, there are some forces in motion right now that may have an impact on just how pervasive RFID technology will be in the years ahead.

IndustryWeek just reported that China alone is plunking down nearly $2 billion on RFID technology in 2007 — out of a global $5 billion spent on RFID. This is significant in that economy of scale kicks in, where more business equals lower prices as the technology becomes commoditized. The big barrier for widespread RFID usage up until this point has been cost (and reliability, to some degree — another issue that tends to be worked out as business picks up). China’s RFID ambitions may not drive the price of passive chips all the way down to the magic 5-cent barrier, but it’ll certainly help.

Indeed, as a technology in itself, RFID has performed well and has definite business value. Unfortunately, it also comes with a certain stigma, especially when the discussion moves from tagging shipping containers and onto tagging people. You’ve probably heard the benefits of human tagging — hospitals can get immediate medical information from an unconscious patient etc. — but several customer advocates and interest groups have taken offense at the invasion of privacy and potential for abuse.

There is currently a bill underway making California the third state to ban involuntary RFID tagging of humans. The word “involuntary” sounds pretty reassuring, right? However, as digital media law expert Jonathan Handel noted:

The bill only applies to employers and employees. That leaves open a host of other scenarios. One day soon, no doubt, prisoners will be required to be chipped as a condition of parole, probation or house arrest [...] registered sex offenders, [then] illegal aliens, welfare recipients, parents concerned with their kids’ safety…

Granted, it’s quite a leap from China’s Olympic Games preparation to parents implanting their kids with RFID tags, but let’s face it: The rise of RFID in commercial settings will inevitably lead to increased options for usage in non-commercial settings. And the baggage that comes with that side of RFID, inevitably impacts the other side as politics, fear and confusion around a new technology tends to muddle the water for all players involved. Let’s hope the market is wise enough to play it safe, ethically and otherwise, in the years ahead.

Matt Danielsson
Editor