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Before I journey back from New York City to even colder weather up in Massachusetts, I want to offer up a few reflections on the SAP “Business Suite 7.0” event that I attended in New York City. Setup: I attended the morning press conference, and I also attended three blogger sessions in the afternoon: one customer session with Jennifer Allerton, CIO of Roche Pharmaceuticals, and then two meetings with SAP executives: one with Richard Campione, SVP of Business Suite Solution Management, and one with Leo Apotheker, Co-CEO of SAP AG. The latter two sessions got a bit chippy, but in a good way that brought out some useful clarifications.

On the Twitterstream, amidst the flurry of news updates, I read some pretty harsh assessments of this event as it was unfolding. (Search for the hashtag #BS7 on search.twitter.com if you want to see the bulk of the event postings). Part of the problem was with the timing and the buildup prior. When we were first told of this “super secret” presser in New York City, my first impulse was that this was a surprise development of some magnitude, like a shuffling of leadership at the board level. But it began to leak out that the event in NYC was simply about the Business Suite.

The reactions I got from colleagues for the event summed up the expectation problem SAP had going in. I heard comments such as: “Companies are laying off thousands of employees and SAP is going to roll out a Suite that no one can afford?” or “How does the Suite address the concerns SAP customers have about support price hikes, or their interest in affordable options like Software as a Service? Surely there will be more announced than Business Suite enhancements?”

As it turns out, the event was a Suite-focused event. On the plus side for SAP, they really did have some important news to share. This was not your typical software announcement. The new Business Suite is the biggest software announcement in scope in SAP’s history, with many features to consider. Some of them, such as the “no upgrade/Enhancement Package” strategy, are indeed in tune with the cost considerations that influence everything in today’s market. This is not the monolithic Suite that we are used to hearing about from SAP.

On the downside, having a Suite-focused event at this juncture posed several communications problems for SAP: first, with the economic crisis still unraveling, SAP took on the risk of seeming like it had a “tin ear” by pushing the Suite right now. Second, the Suite’s incremental and modular appeal works only for those customers who have already made the upgrade to ERP 6.0, which is currently at 13,000 users by my count.

That’s a big number, but there’s plenty of SAP customers that cannot do much with Business Suite 7.0 until they undertake the move to ERP 6.0. Such an upgrade is right around the corner for many customers, but still, SAP was pushing a message that was not immediately relevant to a big chunk of its user base, and now in particular, relevance matters. The third problem is that by focusing an event on the Suite, SAP appeared completely out of touch with trendy topics du jour, including SAP’s approach to the cloud, SaaS, and the “iPhone revolution.”

It’s possible that this event did more harm than good in that last category of buzzword progress, because despite some flaws, SAP is doing more behind the scenes on these trends than was apparent yesterday. In our meeting with Leo, he wouldn’t be nailed down on any formal release dates regarding SAP’s on demand software plans, but he did say to expect some concrete developments this summer. I’d be very surprised if SAP’s “on demand” strategy was not a major focus of Sapphire ’09 in Orlando, but from what I could tell, many reporters left the press conference yesterday feeling SAP was very out of touch with such trends.

The afternoon blogger session with Leo offered a broader view of SAP’s plans. I found Leo’s comments about SAP’s intention to approach SaaS in a “hybrid” model to be much more nuanced that Bill McDermott’s comments on SaaS about a month ago that provoked so much criticism due to the perception that McDermott’s was dismissive of SaaS. I did not get that sense of dismissiveness from Leo’s comments about SaaS at all, but clearly, that’s not what this event was for.

So with that context in mind, what are some of the key aspects of the new Business Suite? Following is a bulleted list with some product clarifications:

– Business Suite 7.0 synchronizes all four Suite components (CRM, SRM, PLM, and SCM) into one united 7.0 release strategy. No more independent releases to manage or strange naming conventions (like CRM 2007 for example).

– You must be running ERP 6.0 to utilize the 7.0 Suite. However, if you are running ERP 6.0, there is no upgrade needed to access Suite 7.0 functionality.

– SAP is now including the entire Suite 7.0 in its “no upgrade”/Enhancement Packs strategy. To my knowledge, an Enhancement Pack is coming at the end of this year that will bring together all the Pack content to date into one offering. (Remember the Suite Enhancement Packs are separate from the NetWeaver Enhancement Packs).

– Unlike what I have read elsewhere, SAP’s promise is NOT “no upgrades ever.” SAP’s promise is “no upgrades for five years.” SAP is adding to that with their “7 + 2” maintenance support which will guarantee customers a level of stability on the new release for a number of years. I don’t expect SAP to ever return to a “massive upgrade” scenario, but they are leaving themselves an “out” on this five years from now, mostly to ensure they don’t box themselves in to a promise that won’t be appropriate in unforeseen market conditions.

– The Business Suite is fully “service enabled” and SOA-ready. One analyst told me they were struck by how much “SOA love” they saw from the SAP customers on the panel, which included Roche, IBM, and Colgate-Palmolive. SOA did not seem at all “dead” in yesterday’s event. This shift seems to be from “SOA as cure-all” to “SOA in proper context.”

– The Business Suite has embedded analytics and integrates actionable information into the flow of the user experience. BI is becoming less of a separate tool and more of a key ingredient in the mix of the user workflow.

– One example of this involved Twitter itself: the integration of customer/brand “sentiment analysis” into the Suite’s dashboard displays. This is the beginning of the integration of “conversation” into a business process. Demos also touched on the Suite’s geo-spatial analytics capabilities.

– While the Suite is fully integrated, it is also more “modular” than ever before. Using the Switch Framework, SAP customers can activate only the functionality they need when they need it.

– With the Suite, SAP is introducing “value scenarios” that follow business events and end-to-end processes even across organizational boundaries.

– As Steve Mann, (@stevemann) Tweeted: “The Suite is positioned as a low cost, easily implementable library of business processes delivered without customer disruption.”

– Business Suite 7.0 also features a “Harmonized UI” for a universal look-and-feel for Suite users (however, this UI is not mandatory).

– Because you can pick and choose the functionality you want to implement, project cycle times are significantly shorter than the classic SAP upgrade.

– Last but not least, my understanding is that you must be running on NetWeaver 7.01 to use the Suite. (Faycal Chraibi, Solution Achitect at SAP and @freakyfays on Twitter, gave me this info and some other useful tidbits.)

That’s quite a list! With all these functionality enhancements, it’s not hard to understand why SAP felt it was important to devote a day to this significant release. Itwas unfortunate for SAP that the timing for this announcement came in the midst of so many pressing concerns that the Suite itself cannot address. Since not all customers have access to the Suite, this could not be a day that was equally relevant to all SAP users. That was unfortunate, as users clearly want to hear from SAP about issues that are directly relevant to their needs today. You get the sense that SAP would have had this day regardless of market conditions. But, to SAP’s credit, they did gear the Suite announcement to the climate we are in, and for those customers already on ERP 6.0, the “no upgrades/activate the functionality you want” message was surely on target economically.

I’ll have more to say on this event in other entries, but the hotel cleaners are knocking on my door and checkout looms.

Before I wrap, I wanted to raise some important talking points that came up during the afternoon blogger sessions:

– Jennifer Allerton, Chief Information Officer of Roche, did verify, amidst a bit of incredulity by some in the room, that Business Suite 7.0 projects are indeed quicker and more manageable in scope. However, she did note that if a company had different regional instances around the globe that were heavily customized, such innovation and short cycle times would not be possible. Therefore, we’ll have to add some amount of “global instance consolidation” as one other major prerequisite to some of the touted Suite 7.0 benefits.

– How will shorter project cycles impact SAP’s service partners who are used to (some would say addicted to) larger and more lucrative upgrade projects? Leo forcefully asserted during our blogger session that in the interests of customer value, SAP’s service partners will welcome these shorter project rollouts. Will be an interesting area to watch.

– What kind of consulting (and project team) skills will be needed in the “Business Suite 7.0” era? To ensure project success, what kinds of new skills do individuals, companies, partners, and SAP itself need to be cultivating? I got some info on that I’ll try to share soon, but it’s a good question to be discussing.

– What role does SAP certification play in the push to improve consultant quality and ensure Suite 7.0 success stories? Leo believes that certification plays an important role (he brought this up himself during our afternoon discussion, at one argumentative point challenging one of the bloggers with the question, “Are you a certified SAP consultant?”), but he also admitted that certification does not assess consultant experience or reputation (see my recent Tweets at @jonerp for more on this).

– Regarding the assertion by some bloggers that SAP’s partners were milking SAP customers with big services price tags, Leo said that if any partner abused customer trust by offering a 5,000 day implementation, that SAP would step in and deliver the implementation in 500 days. He was speaking in hypothetical hyperbole, but his point was that he would not tolerate partner exploitation of customer trust in SAP’s products. The discussion of service value delivery will surely continue.

To summarize the areas that SAP appeared out of touch with during the Suite announcements, Leo responded as follows:

– SaaS: Leo prefers to call this “on demand” because SaaS, in his view, is just one business model for on demand software. During the afternoon session, Leo basically said customers should have a on demand choice and that SAP will “let the market decide” by putting on demand products out there and then gearing the strategy according to demand. Leo envisions a hybrid model for SAP and we’ll hear more on this by summertime. (Note: much of this conflicts with what I have read about Leo’s attitude towards SaaS prior to this event, where it has been argued that SAP will avoid SaaS due to lower profit margins, so I found these statements interesting).

– The Cloud: Leo asserted that SAP was tracking cloud developments and exploring customer value in the cloud. He joked that unlike Larry Ellison, who said of Oracle that “the cloud is not for us,” that SAP is taking a hard look at the cloud…”I believe there is potential.”

– Mobile/iPhone access to SAP: SAP is not planning to build apps for individual phones like iPhones. SAP is rolling out a mobile development platform that will allow third parties to build these apps.

Note that if you missed the live event, you can view a replay of the press conference, and also view related press releases, in SAP.com’s Press Room. If you’re looking for more takes on the BS 7.0 event, I recommend this piece from R. “Ray” Wang of Forrester. At the end of Wang’s piece, he has put together links to a number of articles on the event. I’d like to close by complimenting Leo Apotheker and Richard Campione for standing in the heat of the blogger sessions with candor and graciousness. Leo closed his session by emphatically stating his dedication to helping SAP customers to get through this difficult economic time and emerge strong and healthy. If (and only if) SAP’s follow through can match the passion of his conviction, then there should be better times ahead.

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10 Comments

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    1. Jon Reed Post author
      Blag,

      Thank you. It means a lot to hear that coming from a thoughtful reader like you. I’m glad you liked the summary of the day.

      While I’m at it, I’d like to thank Mike Prosceno and Stacey Fish of the SAP Blogger Relations group. Thanks for giving me the opportunity to participate, and great work with these events!

      – Jon

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      1. Marilyn Pratt
        Your thoughtful analysis and fairness in representing the inherent value, the perceived hype, the palpable excitement, the candid back channel conversations makes me grateful that you and Ed Herrmann (whose Enterprise Geek show demonstrates those attributes as well) were our “on the ground community representatives” in NY, bolstered by the virtual presence of the SAP mentors. Next best to being there.
        It’s very interesting to have you check the pulse of outside in reactions to the event.
        I’d like to hear more about where you and others think the value scenarios, those end to end process themes are headed.  From a BPX perspective “introducing “value scenarios” that follow business events and end-to-end processes even across organizational boundaries.” seems an under-emphasized attribute of the suite.
        I’d love to hear more “What is a Value Scenario” analysis and continue to see people engaging in the thoughtful and challenging dialouge that you have here with Vijay and others.  Thanks.
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  1. Vijay Vijayasankar
    Jon, this is a great summary – thanks for taking the time to post this. I just wanted to comment on 3 things in the post.

    An interesting point that I noticed is Leo’s comment that if partners quote 5000 days, SAP will go in and do it for 500. I think it is a pretty brave statement. I also think it is kind of pie in the sky – SAP thrives because of partners, and if SAP ever tries to tilt the balance, it will be bad for both partners and SAP themselves.Bashing partners, especially SI partners, is very fashionable these days on internet. Projects fail due to a multitude of reasons – and partners are not the reason all failures happen. Of course I work for an SI, so I probably have a biased view 🙂

    On demand is also caught my attention – and I like Leo’s position that SaaS is only one way for it. Not sure if has found a way for by design to work cost effectively – I am eagerly waiting to see what direction it takes.

    Finally, “no upgrades/enhancements” is only a catchy marketing slogan to me. The benefits might not match the hype. For one, by the time every one upgrades to 6.0, SAP will be at the end of its 5 year promised time. Also, irrespective of how you add code to a system – regression testing is generally unavoidable. And it is the testing time that usually takes up the most part of upgrades.

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    1. Jon Reed Post author
      Steve, Ranjan, and Graham – thanks for the good words.

      Vijay, thanks for the sharp comments as always… to your points:

      “I think it is a pretty brave statement. I also think it is kind of pie in the sky – SAP thrives because of partners, and if SAP ever tries to tilt the balance, it will be bad for both partners and SAP themselves.”

      >>>I think this is more of a “wait and see” type of issue. Leo did say that he didn’t want SAP to take over the important business of its partners. I would also tend to agree with you that singling out the systems integrators/partners for project failures or cost overruns is unfair. That’s not really what happened in the session itself, where there was a pretty balanced discussion in my opinion in terms of partners’ responsibility versus SAP, or as Mark Krigsman (who was there) put it, the “Devil’s Triangle” of project failure between customers, partners, and the vendor. But, since Leo stated the point so emphatically, I thought it was worth relaying as something to watch.

      “On demand is also caught my attention – and I like Leo’s position that SaaS is only one way for it. Not sure if has found a way for by design to work cost effectively – I am eagerly waiting to see what direction it takes.”

      >>> Right. I liked his comments about the hybrid on demand vision a lot. As far as BBD, to me, the interesting thing will not so much be the cost effective part, but: what if BBD does sell well but offers the leaner margins that SaaS products typically offer? (Dennis Howlett has cited that SaaS products tend to earn less than 10 percent profit margins, with SalesForce.com at more like 6 percent). Will SAP aggressively offer a product that provides a different profit margin than classic on site SAP? Most analysts have predicted that answer is now. However, Leo’s “we’ll let the market decide” comments in that session implied to me that SAP would put the best products out there and let the customers decide. I hope SAP takes that course, because I believe that is the winning strategy in the long term, rather than catering to obsessive margin issues in the short term. But, as noted, we’ll have to wait until at least Sapphire, if not into the summer, to get a clearer sense of what SAP will do there.

      “Finally, “no upgrades/enhancements” is only a catchy marketing slogan to me. The benefits might not match the hype.”

      >>> This is one area where I think SAP has a chance of living up to the hype. I’ll be pretty surprised if they ever go back to traditional broad-scale upgrades. Customers don’t want it and SAP is adjusting accordingly. The early customer feedback we got on this, such as our talk with Roche, did seem to indicate that smaller scale “selective upgrade” projects were indeed feasible, albeit with the caveat about global instance standardization I noted above.

      But, how much of “no upgrades” is hype we’ll have to see. I hear you, though, in terms of an R/3 customer who is now getting the message “upgrade once more so you’ll never have to upgrade again.” We’ll see how that is received going forward.

      To me, a bigger concern is not so much the hype factor in “no upgrades”, but what will SAP do for revenue growth in the future with upgrade revenues more limited? This gets back to your point about respecting the partners’ role as well. We’ll have to monitor this, but there are certainly some interesting scenarios in terms of SAP heading in other revenue directions. For example, some have suggested that the increasing emphasis on certification is part of a desire to expand revenue streams. That’s not necessarily a bad thing, but education does need to be driven by more than revenue considerations. At any rate, we’ll all be watching to see how SAP can grow in this economy, even more so as conventional upgrades start moving off the table.

      – Jon

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  2. Ranjan Baghel
    Thanks for this comprehensive insight for those who couldn’t attend this event in person. This definitely gives a sneak-peek into the future product strategy of sap.

    – Ranjan

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  3. Muhammad Shaamel
    Jon,
    way to go! some very interesting points on SAP’s perception of technology trends. I must thank you for having compiled so many things so beautifully that we get this feeling we were actually there during the event.

    Two things caught my attention – one being Leo’s tone while cautioning partners not to tax its customers with prices of greater magnitude than expected. A point to debate and it remains to be seen how partners would take that piece from Leo.

    Secondly, assuring the community of upgrade free software for a few years. If that happens, it will definitely be a good selling point to customer 13,001 onwards.

    Thanks Jon once again for the splendid information.

    WR
    Shaamel

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