The SAP Americas Partner Leadership Summit in Miami brought SAP's confrontation with the cloud to a head. For an event not intended for hard news junkies, there were big stories for those willing to read the writing in the sand.
I was part of a modest but determined media presence at the partner event. To preserve the integrity of the event for the partners, media did not have access to all the partner sessions. But we were able to speak freely with partners on the ground and get their reactions to the first-ever SAP partner summit that combined North and South America.
The event is going through growing pains. I'm not going to get bogged down in an event logistics critique; I think SAP's leadership is pretty well aware that the event can be significantly improved, particularly in terms of translating its cloud/HANA/mobile future in practical terms that partners can act upon.
One example of the messaging struggle: a formal piece of news involving the expansion of partner development for cloud, HANA and mobility at a low cost entry point of 2,500 Euros was strangely underplayed. The attendees I spoke with missed a passing keynote reference to the news – a shame given the efforts SAP has taken to simplify partner access to development tools. But the ups and downs of the event are far less important than the bigger theme of SAP's changing relationship with its own partners.
During the second day keynote, one SAP executive made a surprisingly blunt confession, which I paraphrase as: 'Hey, if we could continue to sell software to customers the way we've sold it to them for the last 40 years, we would. But they want new options.' This led to another frank comment: 'You need a PhD to understand our pricing...we are undergoing a massive pricing simplification.' The latter statement resulted in cynical 'we'll believe it when we see it' types of reactions when I tweeted it out.
Fair enough, but I thought the comments were laudable because they stepped away from hype, acknowledging to partners that not everything about cloud is wonderful and easy. That jived with the sentiment I got from the partners I spoke with at the event. Some are moving ahead with new ways of selling and implementing, but many are still figuring out how to turn cloud into wind at their back rather than a barrier to business as usual.
Definitions of cloud becoming more flexible
I smiled when I typed that headline; I know plenty of cloud experts who are not at all flexible in their definition of cloud, nor are they about to relax their definitions because SAP and other vendors are attempting to redefine it to match their software's capabilities. Though SAP would say their approach is about customer choice and flexibility of deployment and pricing models.
When SAP talks about cloud, it can mean one of SAP's multi-tenant SaaS applications, or it can mean hosted' software delivered to customers either as complete applications, or, increasingly, as cloud services. 'Cloud' as SAP uses it does include at least one application (B1) that is accessed via partners through a Citrix log in. Besides subscription-based pricing options, the one common thread I can see in SAP's usage of 'cloud' is that customers are not responsible for maintaining their own data centers for the services described.
Some are going to hate this expansive use of cloud and plenty of vendors are using or abusing it, depending on our view. That debate will be revisited on other blogs. Sometimes I find those debates useful in terms of economies of scale and rethinking user experience, other times they are puritanical.
For our purposes here, you can't asses SAP's cloud strategy without grasping how they are currently using the term, so there you have it. At lunch after the first day keynotes, a few analysts agreed that in our unscientific survey, SAP had mentioned 'cloud' in the keynote ten times for every one mention of HANA. This was a pretty shocking contrast even from two months prior at Sapphire Now.
HANA is always lurking as the 'powered by HANA' foundation that powers many (and fairly soon, all) of these cloud offerings, but this is the new HANA – less a discrete product and more the engine that makes everything else possible, which I like to call 'HANA inside', though Intel's legal team probably doesn't appreciate that.
Frankly I like HANA better expressed in that way, because it shifts the conversation to business applications rather than admiration of processing speeds and geeky talk of rows and columns that causes the CXO to pull out their iPads, just like Bill McDermott once did during a Hasso Plattner HANA keynote (though that was allowable as long as McDermott was checking on that status of a customer sale).
Welcoming MCaaS to the cloud acronym circus
If Sapphire Now was all about the HANA Enterprise Cloud, the SAP partner summit was all about MCaaS. Short for Managed Cloud as a Service, MCaaS provides SAP partners with the option of purchasing SAP product licenses and delivering those applications to partners on a subscription pricing basis. Even analysts who watch SAP closely were bewildered enough to ask “What is MCaaS?” in the press event after the first day keynote. When you consider SAP did not promote ByDesign during these cloud-themed keynotes, and mentioned mCaaS repeatedly, that should give you some idea of the shift in emphasis.
There are plenty of questions about McaaS still to be sorted. One early misconception is that it is simply a means of HANA access – not true. Partners who sign on for MCaaS can purchase licenses to a range of Business Suite applications. In fact, the partner I spoke with who had closed some of the largest MCaaS deals to date had not used HANA in any customer deals yet. Their success was offering core ERP access on a subscription basis via the MCaaS model (if all goes well, soon we'll have a series of JD-OD partner interview videos posted - including this discussion).
On the afternoon of the second and final day, I attended a session on HANA for partners largely focused on MCaaS. I can only judge what I saw in that session and heard during session breaks, but my impression is that while partners are interested in the MCaaS model, they have questions about pricing and licensing flexibility. It would be a mistake on my part to try to convey to readers any definitive pricing information on McaaS when there is clearly more information that I need to understand, and that partners need to clarify with SAP.
With that caveat aside, the pricing entry points SAP was talking about during that session were not insignificant, starting at 500K. I spoke with a partner immediately after the session who told me that his biggest question was not the price, but the licensing options. He wants to make sure if he invests that money he has licensing flexibility, rather than committing to certain product licenses upfront without knowing which applications his customers are going to want to access. He also had a potential 70K deal he wanted to explore with a customer via MCaaS; he was not sure if it would be viable to invest in the financial terms he heard in the session to pursue that deal.
I did not have time to verify the pricing nuances with SAP internally yet, and that's not really central to my point at any rate. I heard from another partner who had been able to work out an arrangement with SAP on MCaaS that was much more affordable – but in that case, the partner had brought a couple of big customer deals to the table.
SAP needs to find a way to make it easy for partners to bring win-win McaaS deals forward, and to communicate that to partners in a way that inspires them to jump in. Common sense would suggest that if partners are offering customers subscription-based pricing, partner ramp-up should be tied to wins over time rather than a huge upfront investment. I hope to hear good reports on that front when I talk with partners at TechEd. This is a story that bears watching; I see room for improvement based on the (still limited) information I have today.
SAP's partner paradox
To realize its business vision, SAP needs its partners more than ever. The feeling seems to be mutual, but that doesn't make partners' next steps easy ones. Steve Lucas made the relationship clear in his day 2 keynote, where he referenced some of the themes of his 'Connected Enterprise' keynote from SAP Insider (viewable on YouTube).
After vowing not to talk about HANA much, and then mentioning HANA at least 25 times before observers lost count, Lucas made the case that today's technology allows for always-on networks between humans and machines, H2H or M2M or H2M or what have you (he conveniently overlooked the pathetic hotel wifi I am posting this piece with, but that's probably a nitpick). Despite talking cloud and mobile and yes, HANA, Lucas reframed the conversation in terms of industry impact - not tech talk. As he sees it, each industry can be impacted by implications of the connected enterprise. The catch? New real-time apps will be needed to deliver on this. This is the HANA-as-platform message, one I strongly prefer to the HANA-as-fastest-database-in-the-known-universe message.
And that's where partners come in. Lucas called on partners to build the apps customers need. This is consistent with messages we have heard from SAP in the past, with partners building a big part of the apps ecosystem around SAP's newest products. The percentages vary, in mobility SAP has long stated that partners will build 80 percent of the mobile apps.
The problem for SAP's partners? Many of them are not experts in application development, much less building the 'delightful' apps that customers want from a user experience standpoint. Also: the digital economy is not just disrupting the consumption of apps. Marketing is a victim as well, something we have covered in-depth on diginomica from many angles.
A discussion with media about the need for SAP to support its partners from a marketing perspective led into a discussion of the marketing dilemmas partners face. Forget about budget – how many partners have figured out how to share industry know-how and become sought after (ahem) 'thought leaders' rather than product pushers?
When you consider the triple challenges of
- cloud business model transition
- shift from push marketing to digital publishing and thought leadership
- building 'next generation apps'
You can see why the excitement partners are feeling about new markets is tempered by a daunting learning curve.
Partners mentoring partners
There's a new breed of partners that grasp these opportunities. It's a shame they weren't front and center at this event. There's clearly a need for partners to mentor partners. Counter-intuitive perhaps, given that in some cases these firms are pitching against each other. But with the push for industry specialization over generic product configuration, that may not be the issue it once was.
I filmed several partners who fit the bill, though all took a different road:
- itelligence is a well established SAP partner that was early in offering hosted All-in-One to SAP customers. CEO Steve Niesmann told me that 1 in 3 of prospects looking at All-in-One lean towards the hosted option. Just about every prospect asks for cloud options first when kicking tires on itelligence offerings; the conversation goes from there based on what's available as 'pure cloud', what's hosted, etc.
- Decio Krakauer, CEO of Brazilian-based channel partner RAMO Sistemas, delivered a B1 service that connected to his customer's SAP SRM application, enabling thousands of suppliers to easily sign up and connect to the customer's supplier portal via a B1 'cloud' service. 500 suppliers have formally signed up for the B1 service; the success has Krakauer talking about a whole new component to his firm's business model beyond the traditional implementation services.
- Jasvir Gill, a veteran SAP software builder and CEO of Alert Enterprise, talked honestly about how his HANA-powered threat detection solution has gained a level of customer trust, to the point that after the horrific Boston Marathon bombing, some important folks got in touch with his company to discuss collaboration on threat detection. Gill was sworn to secrecy on some of this, but I did get him to answer some of the questions on camera. The only HANA startup program member I ran into at the event, Gill's company is much further along the path of building next-generation applications than most of the partners I met.
SAP should take it up another notch featuring partners who are making effective transitions, or are taking the ecosystem by surprise as outliers breaking in. But visibility is only part of the solution. For partners, I believe it's about mentoring and education. They need more than an example of companies that crossed a finish line they still aspire to, they need a chance to hash out next steps and find the savvy use cases in their industry. Some of that happened this weekend in Miami, but for most, success in the cloud is far from a sure thing.
Photo credit: That's your author, photo taken at the go-cart racing track by SAP's Stacey Fish on a post-conference blowout of an evening.
Disclosure: SAP is a diginomica premier partner as of this writing. SAP paid my travel and accommodations for this event.