Book review: SAP Nation – a runaway software economy

SUMMARY:

SAP and its customers needs to pay close attention to this well measured analysis of the ‘SAP Nation.’

SAP a arunaway economySAP Nation – a runaway software economy (Kindle link) is a much needed addition to the public discourse about SAP and its impact on the global software economy.

When author Vinnie Mirchandani first approached me on this topic in the summer of 2014, I was concerned that he would turn his fragile relationship with SAP into a long form rant that would likely stir up competitors but which would not give SAP a way to think about itself in measured terms. If that had happened then we could usefully ignore the book.

As background, Mirchandani has often had this mantra about SAP as the company that might have great software but which has no control over an expensive ecosystem that spans consulting, implementation, integration, data center operations and storage. In blog posts galore, he berates SAP for his perceived failure to grasp the ecosystem nettle. In this book, he argues that SAP sits on a trillion dollar economy that could do a lot better.

Those are the key detailed themes of this book along with a discussion around alternatives like SaaS, AWS and other modern technologies.

Does he do a good job? Yes and no. Yes in placing the issues into context, no because of a not fully thought through economic/technical agenda rooted in his sometimes narrow innovation world view.

I’m pleased to say that despite SAP’s choice not to answer some of the big questions as detailed in the book, Mirchandani didn’t fall into the trap of painting the company as an ogre. Instead, he leaves all observers with questions that today are sometimes difficult to answer and especially in complex landscapes but for which SAP has to take a share of responsibility.

We’re all biased

Of course I am biased. I, along with diginomica colleagues Jon Reed and Phil Wainewright are liberally quoted from public sources. Of course I feel ‘justified’ in offering an opinion. But in reality, Mirchandani offers a unique perspective based upon the fact he has been in and around the SAP ecosystem – or as he prefers to call it: egosystem – for at least five years longer than myself.

First Mirchandani worked as implementer at PwC, then as Gartner analyst at a time when having ‘Gartner’ attached to your name tag meant something of substance, and most recently as arm chair critic that at times has felt out of whack with reality but largely because of his self imposed alienation from SAP sources. It wasn’t a smart move.

Even so, Mirchandani is a careful observer and remains well connected to people who are on the inside of the ecosystem and from whom he can extract nuggets that matter to buyers. In my view, SAP missed a trick by failing to offer content which Mirchandani promised would be unfiltered. They made the mistake that many others before have made: ignore and it will go away. I can certainly argue with some conviction that Mirchandani’s recent relationship with the company was always going to be tough but to miss that opportunity?

Insiders and those who remain close to the company will find little new in the book other than Mirchandani’s attempt at figuring out an economic model that describes the totality of the SAP ecosystem. If you believe Mirchandani’s numbers then it is humungous. Regardless, it is a brave if fraught attempt to define, codify and explain all the piece parts that make up an SAP implementation. That is enough to warrant the price of hearing what he has to say.

Regardless of how you choose to view the numbers, I give Mirchandani credit for providing a considerable amount of detail about how he calculated the numbers, the compromises he made and the advice he took. Kudos also should go to Frank Scavo, a mutual colleague and diginomica affiliate who helped Mirchandani hone his economic model.

What can we learn from the book?

Mirchandani never questions the functional value that SAP delivers and rightly so. Instead, he concentrates on the way SAP has failed to harness the SI, data center and other hangers on ecosystem to deliver economic value back to customers. I have a lot of sympathy with that perspective although I fully understand how that position arises in historical context.

The well documented problems attached to ‘bodying up’ implementations with theoretically trained but experience poor consultants is well explored as are the pressures placed upon battle hardened implementers.

The fact that SAP is currently pitching a hosting and SaaS tent might well change that perspective as the company learns what it takes to build an economic service based model.

History matters

Back in the early 90’s, SAP was incredibly fortunate to be on the cusp of technology changes at a time when customer demands were for global solutions. Digging back into time, Mirchandani notes that SAP was the first company to deliver real-time solutions that have a global footprint in both functional and regulatory delivered code. That advantage allowed the company to obliterate the then incumbents and enjoy one of the longest running periods of software sales success. It was a license to print money that led to market control we have not seen since.

In the process, SAP created a company that became largely tone deaf to the next shift in technology until it could no longer avoid the shifting sands of technology change.

Mirchandani paints a balanced picture that draws from customer experience, analyst input and random observers but the conclusion remains the same: why does SAP consistently appear to cost more for less? It’s a good question for which there is never a simple answer and for which SAP marketing has been woefully inadequate.

Weak points

Understanding SAP has always been a complex task. For myself, I doubt if I have much more than a 40% handle on the full panoply of SAP. It’s a Big Beast. The over arching influence of co-founder Hasso Plattner is never fully explored although Mirchandani was careful to say that he wanted to concentrate upon principles rather than personalities. That is credible for an analysis that must span the regimes of many well known  personalities. Neither are the grinding problems that the German SAP works council exposes when it chooses to play havoc with management. For my part I would have given that crew a severe lashing, finding their continued drip poison feeding to the German press incredibly unhelpful and predicated upon a hidden control agenda that I personally find offensive and cowardly.

Mirchandani’s force fit analysis of AWS as a gold standard cost alternative to EMC and IBM is well trodden turf. Unfortunately, he missed the opportunity to flesh out how that works in SAP’s world of uber compliance. In that sense, he diminishes his own argument.

At a functional level I found Mirchandani’s book lopsided in giving far too much time to failure and too little time to success. Despite he spends a whole section running a history of past and well aired failure, I saw little root cause analysis to make me comfortable about understanding SAP’s part in those troubled implementations.

Bottom line – we can all draw up lists of project failure and SAP as the Big Dog is always going to get more than its fair share of attention. But how does that balance against the thousands of perfectly good implementations? That is not explored in the context of the SAP economy Mirchandani wishes to expose.

I was looking for concrete recommendations around next steps. They are lacking. In that the book fails – but only by a margin of omission, and I sense, by the fact Mirchandani has chosen to sit outside the direct SAP orbit in the last couple of years.

My take

Having provided lots of opinion it must seem strange to see a section called ‘my take.’

  • Despite my critique there is much to learn and bags of detailed war stories.
  • Mirchandani has done a solid job of avoiding personal swipes at a company both he and I have known for more years than anyone should have to but which continues to fascinate.
  • His attempts at coming to an eye popping economic model are commendable and while debatable should be a strong talking point in the context of a services based economy where others threaten.
  • There are weak points around storage etc that could be better addressed.
  • The lack of a path forward might well represent consulting opportunities but they leave the reader at a loose end.
  • SAP management should study this book in a dispassionate manner. There is much to remember and from which to learn.

UPDATE: In comments, Vinnie makes the valid point that I don’t reference the 30+ customer examples. My bad. Each highlights different aspects of managing the SAP Economy but I am not convinced that  – with one exception – they are so different to the 000’s of SAP customers in the global community. Even so, it is right to draw attention to their varied experience and for that – I have failed.

Personal Disclosure: Author Vinnie Mirchandani and I have a ‘bro’ relationship that goes back many years. We both love and hate each other in equal measure. We fight and laugh, often in robust manner.

He requested direct quotes for the book. I refused based upon the reality that I learn a great deal by way of conversations that must necessarily remain ‘off the record’ or under advisory NDA. That in turn requires a degree of consideration that has to be placed into context I control. The book didn’t allow that. I did however provide him with context on certain aspects of the book. Having read it, I can see where he has taken those observations into account as he assembled his thoughts. And for that, I thank my friend Vinnie.

Disclosure: At time of writing, SAP is a premier partner and a personal communications client.

    Comments are closed.

    1. says:

      Dennis, first of all, thanks so much for reading 350 pages in 3 days. Get some sleep:) The review is fair – I just want to make 2 points- a bit disappointing you don’t mention the 30 or so customer case studies/exec interviews. They make up half the book and provide 12 strategies for going forward. I could have come up with a glib “do this” chapter but so much better to listen to these pioneers.- the reason I hold AWS as a “gold standard” as you call it is it’s about continuous improvements. Every quarter they have delivered improved price/performance. In the SAP world, the hosting firms have not delivered that, the offshore firms have not in spite of CMM Level 5 promises, SAP has not in its maintenance charges, the SIs have not in lowered unit costs per implementation step. You don’t have to match AWS to the penny since you want more privacy, local DCs etc but deliver on the improvements. Anyways, let your readers get the book in a few days – the eBooks you can preorder on Amazon, and I would welcome more of a conversation. Thanks again!

      1. says:

        Fair points Vinnie and no foul on my part. I will update for the refs.

        1. says:

          thanks…I was impressed when I considered the risks most of the case studies in book tooka) Flextronics going with Workday way back in 2008 when it could barely show benchmarks of 5,000 employees and Flex was at 160,000b) AstraZeneca’s  flipping of 70/30 outsourced modelc) Embraer decision to go with third party maintenance even in a heavily regulated country like Brazil and in their regulated aviation industryd) GE’s data lake approach with a huge focus on cost and data ingestion time. Think HANA could have focused on similar metrics?e) Deere’s collation of bunch of external data as its HANA use casef) Inteva’s move to Plex away from safe SAP, HP, TCS etc,and many more in book who I call “canaries in the coal mine” – pioneers who did not wait for SAP or its partners to show significant efficiencies 

          1. says:

            My recognition of the Embraer case is a tad distressing: funds parked via RiminiStreet that relreased value back to the business but which almost everyone ignored.

      2. says:

        Vinnie doesn’t make the thesis that SI’s are solely at fault. He recognizes all actors in this play,

    2. says:

      Hi Denis,while i haven’t decided if i should buy the book and because i really liked Vinnie’s first book – The New Polymath, i see this review as balanced and largely in favor of ‘SAP Nation’ even though the title may be a bit misleading as SAP is a truly global company and crossing more than one ethnic nation, though far from perfect as far as diversity goes. i’ve also had my share of SAP Implementations, some more successful than others, but i’ve remained within the ‘egosystem’ for about 15 years and have met others with similar ‘tenure’, so it can’t be that bad. i don’t consider myself a highly paid consultant but more of a value or investment preserver rather than a monetizer or harvester. i’ve lived through the years of ERP’s astronomic growth but also when it was going through hard times, sometimes happening within a span of one year.i’m a little surprised to read that AWS has become the driving force behind ERP, but they definitely are the cloud leader, much to disappointment of the usual corporate players like IBM or Microsoft. however, i was happy to read that Gartner was a ‘better’ company when both Vinnie and i were there, but i didn’t realize it at the time. i don’t expect the book praise either HANA nor HPI (original institution behind the open sap MOOC education provider) which to me are more relevant to ERP than the cloud, but i realize that they may not have the mindshare of IT on this side of the pond. maybe i should see what others in the ‘egosystem’ will say before taking the plunge, but i strongly refute the thesis that only SI’s are at fault when clients’ expectations are not met because we have failed delivering on changing requirements of retrofitting SAP standard into existing legacy applications.thank you,greg

      1. says:

        @greg – read the book – it is worthwhile and not as inflammatory as might be expected. For that alone I give Vinnie kudos.

    3. says:

      Dennis,Nice review. I read the book. Initial chapters are a bit harsh on SAP but overall I liked the book. I’m posting a long comment. Sorry. I came to SAP world from non-SAP IT world. Things that surprised me when I entered SAP world 14+ years ago were:1) SAP product was robust. Rarely crashed. The DB of non-SAP applications used to crash but SAP DBs crashed rarely. The developers didn’t access the DB directly but through Basis layer. The basis layer did a pretty good job of protecting the DB from crashing. 15+ years ago this was a big deal. Plus asynchronous updates helped improve the performance & the level of concurrency. And I believe they played a role — in addition to other reasons (Y2K being one), Vinnie explained —  as to why IT world adopted SAP.

      2) SAP was complex. I’ve not worked on any other global ERP software so I can’t tell if SAP was complex for right reasons or wrong reasons. 3) Team size & roles. The size of the team was very big, bigger than any other teams I’ve worked with before. And the role each team member played was tiny compared to any other team I worked in non-SAP world for 13+ years. 4) Culture: Due to (3), I had challenges discussing DB and/or ABAP issues with my team (Basis) members – I was a part of Basis team supporting BW.

      Any DB issues, my team’s response, talk to the DBA team; any ABAP issues, talk to the development team. BW issues? talk to BW team. What would I do then? Become familiar with TCODES & various options available for each TCODE. The perception was more TCODES you know, more SAP/Basis you know; familiar with more options available for a tcode, you’re an expert. We were not expected to know long term implications of choosing or not choosing an option/tcode etc. This was kinda new world for me, new culture. (Note: Before entering SAP world, I’ve played multiple roles: Developer/DBA/Data Warehousing modeling/Star Schema modeling so learning to perform just Basis work was hard for me.)

      And as almost all team members including project managers didn’t have enough experience/knowledge/skills, everyone was busy learning/discussing various options available and/or new tcodes or how to navigate SAP service marketplace or how to search SAP database looking for solutions for a problem etc. etc. (Can’t think of a better example for “Making a mountain out of a mole hill”!). I don’t know who helped cultivate(SIs or SAP or both) this culture but this was definitely not healthy. And this culture still exists. This culture also led to other consequences such as lack of appreciation for training classes, certification programs etc.

      I even read blogs stating some companies wouldn’t even consider pursuing further if someone had mentioned SAP certification in his/her resume!! I’ll save discussions on why I would attend training programs or get certified for another day but the point is that there’re multiple reasons why one might decide to attend a training program or get certified(becoming familiar with TCODES is  definitely not one of my reasons). This culture also didn’t help hiring skilled people to HANA space.

      HANA requires SQL skills and other database skills; 25+ years of SQL/DB talent available in the market. What percentage of HANA developers are from this group? This aspect in my opinion was more important 2+ years ago when SAP was trying to make HANA robust, scalable, reliable etc.Other challenges that Vinnie is not discussing or did I miss reading?:1) Confusion: SAP seems to rely on non-SAP people to formulate their strategy/direction/message. HCP/HEC are examples. As we know, cloud plays very important role for SAP.

      However if you compare Oracle’s cloud strategy with SAP’s, you would notice a big difference. It does seem SAP is doing cloud in non-standard way. The industry is aware of IaaS, PaaS, DaaS, SaaS etc. Oracle offers Oracle Cloud;under that, one can subscribe to IaaS or PaaS or DaaS or SaaS whereas SAP offers HCP and HEC. We(non SAP) spent considerable amount of time & efforts to determine which is which. Regardless of what SAP is attempting to accomplish(Run simple), I continue to see the complexity in everything they do.

      Just y’day, I spent 30+ minutes to navigate to correct URL to download license key for our sandbox(after system copy) in their new portal. This key was generated during last system copy but their new portal is not smart enough to provide all information about my system in one page! And each system has Hardware key, Installation number, System number(different from system name). In some screens, I can’t search using system name(which is what we’re familiar with) but using 8+ digit installation number.2) College Recruitment: My son graduated recently in Computer Science(CS) but he has not heard HANA much. Everything he knew about HANA was from me. I know his friends joining or getting offers from Oracle but not SAP. Vinnie discusses SapphireNow 2014 where we saw some college kids on the stage demonstrating the power of HANA. That was good one. However the book doesn’t throw any light on how SAP fares in terms of attracting CS talent from major US/European universities. The future innovation depends primarily on this.

      Thanks to Vinnie for writing the book and Dennis for the review,BalaPS: Over next few days @dahowlett will pick third winner based on write-ups which reference this Crowdchat. Have you picked third winner yet?

      1. says:

        Bala, thanks, excellent comments You are correct, there are so many perspectives I could haveincluded from a developer – current and future gen SAP as career pov. The bookis written primarily for a SAP customer executive – so as you saw half the bookis perspectives from their peers. Also, early on feedback I got was (especiallywhen discussing HANA, in-memory etc ) was that I was skirting close to too muchtech talk and not enough on economics of SAP deployments. The other thing I was a bit hobbled by was I mistakenlycounted on feedback from SAP on futures – I offered them opportunity for anunedited essay – and hoped they would address how they plan to address thenext-gen developer and data scientist as you point to Regarding the third free book, Dennis kindly let JohnFurrier, the founder of CrwodChat pick the winner and it was Chris Kernaghan.    Thanks again for your thoughtful and lengthy comments

        1. says:

          Vinnie,Good point. The book is not technical, easy to read. I liked it. Thanks.