Those who ignore history

I first met Dr. Hasso Plattner of SAP 15 Sapphires ago. He walked into a meeting with Gartner analysts and in mock anger asked “which of you XXX called my products too complex to implement?” I wanted to hide under the table knowing well he was referring to a report I had just written about the burgeoning systems integration cost around R/3. He then smiled and I started to breathe again.

The problem is back in 1996 we did not anticipate that the systems integration cost, bad as it already was, was just the tip of the iceberg. As SAP customers went into production, they outsourced their hosting. They had massive upgrades every few years. As they consolidated and put shared services around SAP their network needs grew significantly. They outsourced their application management to the Deloittes, and then to offshore vendors like TCS. SAP kept increasing their customer commitment to the Microsoft desktop with products like Duet.

The ecosystem around SAP grew and grew and grew and every Sapphire we would dance around the topic and SAP would keep talking about certification of SIs – which only focused on the implementation cost, and not much on the other layers I describe above.

Fortunately, in galaxies removed from SAP, operational innovation had been happening. Google and Yahoo! and Facebook have been redefining data centers to reflect PUE and economics that SAP’s partners, IBM and Accenture should have been pioneering. salesforce and NetSuite were showing how thousands of customers could be supported in multi-tenancy by handful of staff – even as offshore vendors needed more staff for EACH of their SAP customers. amazon was showing companies how to store data at 15c a gb a month when SAP customers were paying their hosting vendors as much as $ 3. Rimini was showing customers basic tax maintenance and other routine fixes could be delivered at a fraction of what SAP wanted.  Vendors like Workday were delivering multiple releases a year and importantly migrating their entire customer base within days while SAP’s customer base took years to migrate. Vendors like Zoho were showing you could do much of what the Microsoft Office delivered at a fraction of its cost. SAP’s own SDN was showing a better way to deliver Level 1 support – let the community handle routine, repeat queries. Countries like Korea and municipalities like Lafayette, LA were showing Western telcos were grossly overpriced for their broadband.

But all this seemed oblivious to SAP. Indeed they had good answers – our customers are too complex, our customers tell us they are committed to a Microsoft desktop etc.

And yes back to SIs – many IT teams around the world were showing much more agile productivity and economics of repetition than the average SAP customer saw even after tens of thousands of implementations. A discovery which shocked me while at Gartner in 90s – just the travel cost of the consultants often exceeded the SAP license cost – is still true in many SAP projects even today.

Dennis Howlett wrote a blog yesterday after meeting with Dr. Plattner and Vishal Sikka, SAP’s CTO where he says “ Vinnie’s views have already been anticipated by SAP”. I can see some progress, but the dimensions that need monitoring have grown dramatically since 1996. And SAP is eager for all of us to focus on its new mobile, cloud, in-memory world promising things will be different this time around.

Given the track record around its core, I am not so sure. I can easily see SAP ignoring Apple’s and Google’s mobile ecosystems built by an army of entrepreneurs and continue to rely on its old faithful services partners. I can see SAP continue to avoid building its own data centers and continue to rely on its hardware partners. And a few years from now, we will be bitching about outrageous mobile roaming charges, ridiculous hardware requirements for in-memory computing and who knows what else.

SAP has not lost its ability to attract partners with champagne tastes.