Disclosure - SAP was a recent consulting client and so I have been given information that is under non-disclosure. Even so, none of that impacts my opinion on events about which I have no prior knowledge. Today's Investor Symposium was such an event.
The last two years, SAP has been trying to figure out how it transitions to a business model that both satisfies customers and its financial masters. Past vendor experience suggests this is a tough ask. There are a myriad of reasons for this but at its heart lies the problem of fundamental business transformation for any company with a long pedigree of success.
Yesterday's Investor Symposium, (PDF) was a platform for SAP to demonstrate where it is at, where it is going, how it gets there and how that is achieved - while all the time keeping the financial analysts happy.
I have no clue whether the financial guys were kept happy What I do know is that the share price was largely unchanged for the day, suggesting that at worst, the analysts were sent away with plenty to ponder.
For my part, I was happy to see SAP present a cogent argument that answers many of the questions raised by both investors and customers.
What was said/not said
The financial analysts love co-CEO Bill McDermott's hard sell but talking about SAP 'imposing its will' on a market that has voted to buy Salesforce.com and Workday is a tough sell without proof points. Even so, McDermott's call to arms was a good start.
Dumping board member Vishal Sikka into the bear pit for this kind of event is a 50-50 shot. Sikka is a geek and madly passionate about HANA technology - the lynchpin upon which SAP's future depends. You either love it or hate it. I love it because I have had the privelege of being close to the action and know just how much success in this endeavor means to this humble man.
Watching Sikka draw out HANA architecture will not be to everyone's taste but to see him rub out lumps of the picture and declare: "....all this crap (goes away)" was a masterstroke of unscripted language rooted in an expression of genuine belief - even if he didn't know it at the time. Its the sort of unvarnished message SAP customers need to understand.
But it was in some of the subtexts that the true path for SAP emerges.
Bernd Leukert, member of the global management board talked about how SAP is co-innovating with its large company industry customers to deliver the 21 st century solutions that are required. This requires a two way information exchange that re-ignites the notion that SAP has deep industry expertise.
While there are no formal statements on this topic, my sources at SAP acknowledge the company has lost this key piece of IP in recent years. It knows the way that business is shaping up for the future demands a much closer understanding of evolving business and processes. Leukert's words should comfort customers who have wondered whether SAP was out of touch. Results will prove the point.
Talk of positive user experience across mobile and other platforms was a welcome addition. SAP has a mishmash of user interfaces, some of which date back decades. Some are pig ugly. Newer interfaces like Fiori and Lumira show solid promise of making SAP 'millennial friendly.' But it's a big ask when the SAP landscape can include 300,000 screens. Hearing commitments to understanding the end user is almost unheard of from SAP so yes - another tick in the box.
One analyst hit on the intellectual renewal topic. Sikka's response? Ignoring renewal leaves SAP at risk of becoming irrelevant "We cannot allow this to happen," he said. Here there are numerous challenges not least a German works council that seems to take delight at lampooning board members and founders and over which the current management seems to have little control. I make no secret of my distaste for this situation.
SAP is not alone in having to tackle these issues. Every company I've consulted with over 20 plus years that has these issues is faced with a dilemma that's almost impossible to resolve short of an IBM near death experience. The answers seem deceptively simple from the outside and readily understood internally at the highest levels. But it is a wholly different matter when dealing with an organisation conditioned to believe in its own infallibility. This remains SAP's greatest risk.
Customers speak loud
Tough words aside. SAP did something that gives me a great deal of hope. It rolled out a real user with a real story who answered analyst questions without prior coaching. ConAgra's Mindy Simon, vice president of information technology told the most compelling SAP HANA story I've ever heard. As Larry Dignan pointed out:
Keep in mind SAP wouldn't bring Simon to an investor powwow if she was disgruntled
But...she answered all analyst questions with a refreshing degree of candor that has been sadly lacking from past canned and staged efforts. My message to SAP: Give us at least half a dozen of the same on the main stage at SAPPHIRE because that shit sells itself.
Last but not least - it was good to see SAP make clear that it is taking on the hardware and services components of its implementations. Jim Snabe, co-CEO was particularly virulent on this topic: "Hardware and services pay the price," he said. McDermott went further - 5/1 licence/service costs? No way - he wants to see: 1-1. That's the cloud implementation benchmark,
SAP was at its most aggressive in this set of presentations that not only set out the course but presented a deep bench of committed executives. While not pristine in presentation terms, canny analysts should see that SAP is deadly serious about the challenges ahead and how it proposes to tackle them. For the first time in a long time I witnessed an SAP that was far from defensive - even if it lapsed into market platitudes from time to time.
Now it is all about execution and my best guess is that SAPPHIRE is the place where this comes together - or falls apart.
I've had multiple requests to comment on SAP's position re: Fiori - a UI update that carries a charge. Personal experience tells me that anything SAP sees as IP carries a cost. At times this seems unreasonable. When we first heard about Fiori cost uplifts our immediate reaction was - duh? I have to pay for a modern UI when I'm under maintenance?
SAP countered by saying that Fiori represents new applications. While a stretch in some cases I could see the potential for a cost/benefit equation that justifies the expense. However, perception is reality and consistent reports say that while customers would like to take advantage of Fiori, they baulk at paying for something they believe should be included in the overall applications cost as part of the maintenance they already pay.
SAP is not an island and competitors see this as a weakness they can exploit. Workday for example recently refactored its user experience and user interface. That is an included item in their price book. There is no separate or fresh charge. This is a topic of ongoing discussion with SAP but my take is that customers need to consider the whole estate TCO when pondering a move to SAP HANA/Fiori.
For SAP, this is a very fine line to tread. I cannot imagine that the additional revenue Fiori raises is much beyond a rounding error for a company generating some €16.9 billion in top line revenue. However, its impact at the customer level appears to be a case of the straw that could break the camel's back.