Having just attended back-to-back conferences and now being knee deep into earnings season, I chose to pass on attending SAP TechEd this week.
Luckily for me, there are a handful of my fellow Irregulars in attendance doing their usual bang up job covering the event.
David Terrar got a good introduction on the power of the SAP Developer Network (SDN).
Probably the most significant thing I’ve seen on the first day is SDN. Because I’ve been out of touch with the SAP ecosystem, before I arrived here I had no idea of what it was. If somebody had explained that it was the SAP Developer Network I would probably have dismissed it as just another forum - many products have some form of bulletin board for the users, and that kind of thing has been around even before the internet since Usenet in 1980, so nothing new here. What’s unique is the scale of the thing, and the way that SAP is embracing the changes it will bring. There are over 570,000 subscribers, it is completely open, and the core service is free - I’ve just joined this morning. You can ask any question you like, and there is passionate community, 94% of which aren’t SAP employees, who are willing to answer questions. As well as spreading their knowledge, and promoting their expert status, contributors are awarded with a points system, which gets them things like free entrance to TechEd (and badges!).
I'm glad to see my friend David get a clearer understanding of SDN. It's a massively impressive effort and one that anyone remotely associated with SAP is foolish to not embrace. As an investor, it's great to be able to go to a community of SAP users and developers and get a true sense of their products and trends in an open dialogue. Much like the way SAP embraces bloggers in a way few big enterprises have done, their publicly-accessed SDN is an indication of their forward thinking. In related news, Tom Otter has a fascinating review of the recently launched SDN wiki.
It appears the big controversy came today when a handful of SAP executives had a briefing with my blogging brethren. According to both Dennis and David, SAP was quite dismissive of SfDC's AppExchange. Apparently Peter Graf referred to AppExchange as a "one trick pony."
Den writes:
Dismissing Salesforce.com as “a one-trick pony” Graf claimed enterprise customers will steer clear of Apex because of security and reliability concerns — claims that of course were rapidly refuted by Salesforce.com.
What a shit storm that set off. Charles Zedlewski, a SAPper and fellow Irregular offered a spirited analysis of the situation, basically dissecting Salesforce.com’s rationale behind Apex. I have a lot of time for Z. He’s a bright guy, even if his name does remind me a bit of Z in Pulp Fiction. He is intellectually honest, enquiring, engaging and prepared to both listen and respond.
Nevertheless, in a Q&A, I asked Peter to explain how AppExchange is that different from the stuff SAP is looking to see emerge from the SDN networks. One of Peter’s sidekicks chimed in with a paraphrased version of a point Z made:
In the end Appexchange is a more efficient version of a partner catalog.
Ouch - hand bags at dawn. Peter then said he didn’t start any argument but he wasn’t really addressing the issue I’d raised. Wooooh tiger. Re-writing history? Didn’t Peter stop to think for one minute that making provocative statements around fashionable SFdC was bound to cause a backlash? Especially as SFdC CEO Marc Benioff is so quotable? I said something like: ‘Excuse me but the reason I’m asking is that you started a pissing competition around SFdC so it’s a legitimate question.’
David echoed a similar account and suggested that Peter isn't alone among SAP execs in his dismissive view of AppExchange:
When Dennis Howlett asked them about Salesforce.com AppExchange, which allows you to pick and chose from plug in applications to customise your Salesforce implementation, Zia twice dismissed it as:
“just a directory of companies”
and went on to say:
“we’re working in different leagues.”
When Dennis referred them, in the typically colourful terms that we bloggers tend to use, to Peter Graff’s recent comments on the topic as quoted by Phil Wainewright, feathers were ruffled and Bill Wohl responded:
“We’re not in a pissing competition to use your words”
Talking to Zia [Yusef] afterwards, it’s quite clear that they don’t recognize AppExchange as a platform, and are frustrated by the amount of attention generated by the recent Apex announcement which they don’t see as a new or significant programming language.
Why I'm not surprised, but why I am disappointed...
Let's be clear. SAP and SfDC are NOT playing in the same pond CURRENTLY. For as successful as SfDC has been, there's no denying it remains very much a departmental solution within its large enterprise clients; which obviously isn't the case for our friends in Walldorf. But what SAP needs to be careful of is completely dismissing what SfDC has going with AppExchange and now (potentially) Apex. For every developer that uses Apex, for every small partner that finds the friction of becoming an SAP partner too intense, they give SfDC more fuel for the eventual meeting in the middle.
What do I mean by meeting in the middle? Facts are facts. For as much as SAP is rightfully thought of as the vendor of choice among Global 2000 vendors, they are unequivocally relying on the mid market for a big chunk of future growth. On this morning's earning call, Henning Kagermann said:
We continue to make excellent progress in the mid-market, as evidenced by the continued growth in the number of channel partners and mid-market customers. The channel business, from which we will derive volume growth, will be key to achieving our 2010 aspirations of generating 40% to 45% of our order entry from the mid-market.
SAP has to realize that if it REALLY plans on generating billions of dollars in the mid-market over the next few years, it's going to have to embrace SaaS far more aggressively than it does today. Personally, I think the SAP executive team 'doth dismiss too much and takes SfDC VERY seriously when there's not a microphone in front of them. It's one thing not to overreact to the challenge AppExchange (and other potential platforms) represent (SAP's core market is safe in my opinion) but to completely ignore the competitive dynamics would be foolish. SAP has proven it's anything but a foolish organization.
Note: At the time of this writing I, and/or funds I maintain discretionary control over, maintained a long equity position in SAP and CRM. We also may, at times, carry derivative options on underlying positions as a hedge.
teched sap david terrar dennis howlett salesforce.com sdn crm peter graf software irregulars enterprise irregulars woodrow
Hi Jason/David.
I posted about an interesting small but global company project with a difference, on good old ERP today- may interest. http://theotherthomasotter.wordpress.com/2006/10/20/you-find-sap-in-the-most-unlikely-places/
Nothing like a real live customer to put things in perspective.
Here inside SAP there is a heathly paranoia about competition, whether in the platform space or in the application world.
Perhaps I could remind your merry bad of readers what teched is for? It is mainly aimed at the SAP development community, it isn't a Sapphire or an analyst event.
SAP teched'06 is all about getting folks to innovate with the SAP apps and tools, get the SOA story out there, so this naturally ends itself to an ERP2005 focus, which is the flagship.
I have said before that my SaaS tip is ADP. It is one of the few companies that run services really profitably (and has been doing since day dot), and SAP is now a big part of ADP's core global offering.
SAP can learn lots from SDFC, and it will. Many vendors dismiss SAP as a dinosaur, but more often than not ends up being the meteor.
I reckon Peter Graf knows exactly what he is doing. He is one of the brightest people in this space that I know.
You are right to highlight the partner friction problem.
I'm looking forward to reading more posts about innovation at teched, cool development in rich application UIs and so on, and less about the pr.
Posted by: Thomas Otter | October 20, 2006 at 09:29 AM
Hi Jason,
You've hit the point exactly. I'm sure there are people internally in SAP that understand the real threat of SfDC, and the real opportunity of SaaS in the mid market, but at the moment some of the SAPpers talking to the outside world either don't understand or have got the messaging wrong. As I saw from TechEd, they have plenty of ammunition to counter or contrast AppExchange with facts and figures, rather than dismissing it with less than accurate commentary.
One other thing on their messaging that baffles me (which I'll post about later today). At TechEd ALL of the focus was on mySAP ERP 2005. When A1 or B1 were asked about, they were given brief one-liner replies. The senior EVPs that I asked said that they didn't want to shift focus from SAP's main message, but if you say "the B1 strategy is unchanged" to a blogger/reporter and absolutely nothing more, my first suspicion is that it's a product that's past its sell by date. Off-line they seemed to be arguing that wasn't the case, but it's another way they are leaving themselves open to attack.
Posted by: David Terrar | October 20, 2006 at 02:29 AM