What I Liked (and Didn't Like) at SAP TechEd 2009

SAP TechEd 2009 Phoenix is in the books. During my flight home from sun-soaked Phoenix to drizzly Massachusetts, I have the chance to reflect on the pros and cons of this year’s event before I am re-introduced to inhospitable weather.

SAP TechEd is first and foremost a community gathering. I am part of the SAP Mentor Initiative, a community-nominated group of “top influencers” who are often at the center of the TechEd mix. This year, we were easily spotted in our blue rugby shirts, which turned us into an odd (but fun) combination of rock stars, roving help desk extensions, and conversation facilitators. Many of us chose to have our Twitter handles (@jonerp in my case) emblazoned on the backs of our jerseys – another sign of the changing times.

As someone who has worked in the SAP market for more than fifteen years, I am struck by how much the community side of SAP has transformed, powered by the SAP Community Network, now up to 1.8 million members. The SAP community today is a colorful blend of high ideals, social networking innovation, and the messy interpersonal dynamics that make community so challenging. Leveraged properly, I believe it’s also SAP’s greatest source of competitive advantage, but that’s not necessarily an easy thing to measure.

Despite such growing pains, the community side of SAP is working, and therefore, the community-building part of SAP TechEd was a smashing success. But SAP TechEd is not just about community. For industry observers, it’s a chance to take the temperature of SAP during its second biggest event of the year after Sapphire. Four months removed from Orlando, we can assess SAP’s progress on a range of issues. I am also part of SAP’s blogger relations program. During those sometimes contentious (but always worthwhile) blogger sessions with SAP executives, I got a better sense of the criticisms of some of my analyst colleagues, not all of whom are enamored with SAP’s current strategy. (Check out Brian Sommer’s post on the future of ERP for one cogent sampling).

For the rest of this blog post, I will share my own likes and dislikes from TechEd in terms of SAP’s overall direction, with a couple of recommendations thrown in at the end. Before we continue, I should say that at TechEd, SAP seemed realistic that the downturn we are mired is not likely to improve much next year (though some inside SAP are optimistic about modest improvements). That’s a context all ERP vendors are dealing with, and while it’s not necessarily fun for those who rent a booth at TechEd in search of eager buyers (I spoke with several booth vendors who weren't happy with the buying temperature), it’s certainly a reality that frames all of our critiques. But there are opportunities for innovation and re-invention within these constraints, and that’s what the analysts I spent time with were looking for.

What I Liked at SAP TechEd 2009

1. SAP’s sophistication around social networking is leading in two useful directions: better “virtual” live coverage of SAP events for those who are unable to attend, and on-site integration of the Twitter conversation into the live keynotes and events. (Many replays of the SAP TechEd live streaming are available now).

SAP also recognizes the importance of “socializing” their applications in ways that will enhance the user experience and facilitate crowdsourcing (though the emphasis on social networking in the enterprise also creates a surge of unstructured data, exacerbating the existing problem of tying that unstructured data to the ERP transactions it is relevant to). SAP's acknowledgement of the importance of unstructured data is reflected in the expanded SAP-Open Text partnership, one of a handful of SAP news announcements issued during SAP TechEd Phoenix.

2. Vishal Sikka’s emergence as SAP’s technical “visionary” is a role he is well suited for. Sikka does not put his head in the sand regarding the impact of cloud-based approaches, and I welcome his honesty regarding SAP’s product rollouts. For example, unlike some other comments about SAP Business By Design (ByD) I read from another SAP executive prior to TechEd, Sikka did not try to blur the lines to give an appearance that ByD is in general release. When asked, he accurately described ByD as in “limited release” in several countries. He also conceded that SOA has not accomplished what many hoped it would. Sikka’s view is that SOA was a step in the right direction, but in terms of true ease of interoperability, it did not take us far enough.

3. SAP seems to be shifting internally from an overemphasis on upgrading to SAP ERP 6.0 to paying more attention to the existing install 4.6C/4.7 install base. I was able to get verification of these existing install base numbers at TechEd. The ballpark figure: 13,000 SAP ERP 6.0 customers out of a total of 36,000 total SAP ERP customers.

Most of those not on ERP 6.0 are on 4.6C or 4.7. In my view, these customers, who still form the majority of SAP’s ERP user base, have been underserved by SAP in terms of innovation. No surprise: this is the portion of the install base most frequently targeted by outside vendors from NetSuite to Rimini Street to SalesForce.com (and, someday soon, Fusion?), looking for the so-called “low hanging fruit” who may be disillusioned with paying maintenance costs without access to new functionality.

The most compelling things SAP has to offer are either easier to do, or only possible to do, on ERP 6.0/NetWeaver 7.x. The use of the NetWeaver Business Warehouse Accelerator for in-memory database capabilities is one example, though a 4.x ERP customer can run a separate BW 7.0 server to access BWA, but they must upgrade their BW instance to 7.0 to make that possible. Other examples within the ERP 6.0 suite would include the service-enabled ERP 6.0 framework, the new General Ledger, cutting edge talent management functionality, and the list goes on.

But at this year’s TechEd, I saw signs of real change in this thinking. Unfortunately the bulk of this information came during private SAP Mentor “functionality preview” sessions that are under NDA. Not all of these previews will become formal parts of SAP’s product release, at least in their current state. But I don’t think SAP would mind me saying they are increasingly looking at how they can improve the user experience and access to innovation for 4.6C/4.7 customers. SAP will certainly continue to push upgrades, but I expect to see more balance in that marketing as more nifty products are available to SAP users regardless of release. I believe customers will welcome a shift in emphasis to "get value out of SAP now, without having to upgrade."

4. SAP is reckoning with the cloud. Even in Sikka’s keynote, there was an emphasis on cloud-based SAP possibilities, though the examples came off as more visionary than proven use cases. Still, on a day when I was reading Tweets from the Oracle “Open World” event mocking the lack of mention of the word “cloud,” SAP seemed more locked in.

5. SAP is expanding the conversation on BPM beyond tools. Events like the Process Design Slam showed an emphasis on “process thinking” in action. Though SAP is still evolving its NetWeaver BPM release (see Sandy Kemsley’s blog for more on NetWeaver BPM 7.2, currently in beta, as well as her reviews of the Process Slam), I see a shift in focus beyond tools to BPM as a strategic shift. This shift involves creating and innovating business processes on the fly, using whatever tools are best suited for the purpose.

During the Process Design slam, the bulk of the modeling was done on Gravity, the intuitive modeling environment that SAP built for Google Wave. As a tool, NetWeaver BPM got mixed reviews from those I talked to at TechEd (not intuitive enough, too many steps to build a process, too technical for the business user), but now that SAP has shifted the conversation from pushing tools to pushing a BPM-enhanced approach to ERP, we don’t have to wait until SAP gets the tool just right. I expect NetWeaver BPM will eventually have some unique advantages, especially once it is tied into Solution Manager and the user experience is simplified to the point that the business users rave about it. In the meantime, events like the Process Slam that emphasize process thinking and composing on top of ERP can further the BPM conversation.

What I Didn’t Like at SAP TechEd 09

1. Lack of conversation about SAP Business By Design (ByD). The absence of a general release version of ByD puts SAP on the defensive when it comes to the impact of SaaS trends and demonstrating that SAP is going to be a leader and not a laggard in this area. It seems that SAP continues to struggle with how a pure SaaS play like SAP ByD can fit into SAP’s existing business model without cannibalizing existing (and potential) revenues from on-premise products, in particular SAP All-in-One.

However, that is solely my opinion and I don’t have an on-record quote for you on this topic from an SAP executive. That’s part of the problem – absent such dialogue, the speculation about SAP ByD in blog posts like this will continue. SAP can address this by making sure that an SAP ByD product representative is present at every significant SAP event going forward. To give you a sense of the problem, I was pinged on Twitter by an analyst not present at SAP TechEd asking me for a ByD update. All I could dig out was the basic message from Sikka from the post keynote press conference: SAP is happy to take its time getting SAP ByD right. I don't disagree with that stance, but it's not enough information to further the conversation.

2. The "pockets of innovation" approach. This one is kind of a double-edged sword, because SAP showed off plenty of cool stuff to bloggers and Mentors from a lot of product teams who are doing compelling work, from UI enhancements to sensor-driven applications. Those who perceive SAP as a core ERP monolith out of step with the times are dead wrong. However, outside of the SAP BusinessObjects push, most of these innovative internal teams are small ones, creating the perception of pockets of innovation within SAP. At some point, SAP needs to take the work of these trailblazing teams and put that work front and center. This might involve culture change as well as overcoming obstacles to scale such innovation. But those are challenges worth grappling with.

My Post-TechEd Recommendations

1. Expand the teams of innovation inside SAP. Groups such as Denis Browne’s Imagineering team in Palo Alto are producing important projects that can change the value of SAP beyond transaction processing. Browne’s team is involved with customer co-innovation, and the use cases are starting to come in (a team from Browne’s group also won DemoJam this year - you can view the DemoJam replay, as well as an interview with Browne, on the SAP TechEd live archive). Browne reports directly to Sikka, so as his team’s success stories come in, SAP should look to increase investment and take on the challenge of scaling the best work.

2. Don’t wait for the numbers, invest more in the community. SAP’s community is working amazingly well, but like all such communities, some of the greatest benefits are hard to track on a spreadsheet. If I were SAP, I’d take that lead in the vendor community space and push ahead with aggressive investment. You can’t put a price on a passionate community of advocates pushing SAP conversations all across the web. If you get into too much head-scratching on the numbers side, you miss out on the chance to reward those who have worked so hard to take SAP SCN to this level and to build on its existing strengths.

3. Emphasize and expand the SAP BPM Methodology. I doubt that many are aware that SAP defined a BPM methodology that should eventually replace the ASAP methodology as the recommended approach to implementing SAP ERP. Right now SAP’s BPM methodology has a wiki, but I think all would benefit from a more visible and focused discussion on what this change in methodology is all about. I did a video with SAP's Ann Rosenberg, co-author of Business Process Management: The SAP Roadmap, on the significance of BPM to SAP going forward, including the upskilling of all SAP's application consultants into "process consultants" via the SAP BPX curriculum. As soon as that video is processed I will link to it here.

4. Get an SAP ByD product representative to SAP TechEd Vienna and provide a detailed business and technical update to analyst and bloggers. Ideally, bring a ByD customer or ByD customer panel along as well.