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5/6/2014
09:46 AM
Doug Henschen
Doug Henschen
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SAP Shakeup Puts Focus Where It Belongs

SAP just set its priorities straight. Here's why Vishal Sikka's departure shouldn't worry SAP customers.

Some SAP watchers are wringing their hands, worried that Vishal Sikka's surprise resignation, announced Sunday, spells trouble. I'm not one of them. Quite to the contrary, I think it signals a return to realism and appropriate priorities. Here's why.

For more than a few years now there has been tension within the ranks of SAP. The tension has been between chairman Hasso Plattner, his protégé, Vishal Sikka, and their loyalists, and those who had a broader focus and, in my view, a clearer sense of market realities. You'd hear snippets about this tension from employees and even from customers close to the company, and you'd see more detailed comments in response to articles.

As industry insider and analyst R "Ray" Wang of Constellation Research put it in Monday's report on Sikka's departure, the Plattner/Sikka camp favored "build versus buy" and "great platforms that would lead to great apps," and the other camp leaned toward "apps over platform and execution over innovation." It's a bit of an oversimplification, but think of one group as the Hana camp and the other as the apps and cloud camp.

[ SAP's co-CEO disagreed with this assessment. Read SAP Shakeup: Bill McDermott Speaks Out.]

No matter how much innovative work SAP might whip up as part of its platform, SAP is, fundamentally, an applications company. In that world, cloud computing has become the dynamic that all players must address. Hana might help that cause to a certain extent but, somewhere along the way these past four years, the promises and expectations heaped on Hana started getting out of hand.

Hana started out as an analytics accelerator and then became a full-fledged in-memory database management system (DBMS). Soon, transaction processing was added to the list of promises, and "radical simplification without disruption" became the rallying cry. Next, Hana evolved from being a DBMS into a platform, packing analytics, application server, and data-management components. As pressure mounted to respond to the cloud threat, Hana became the platform for all SAP software-as-a-service and managed services offerings.

Meanwhile, the rest of the technology world has been catching up with SAP's in-memory promises. Microsoft has released SQL Server 2014 with In-Memory OLTP and Oracle is promising its Oracle 12c In-Memory Option later this year. SAP still has points of differentiation, like the promise of radical simplification. But as we detailed in our March cover story, "In-Memory Databases: Do You Need The Speed?," we've seen scant evidence that companies have actually been able to eliminate separate layers of infrastructure for transaction processing and analytics. In fact, we haven't talked to any large companies -- save SAP itself -- that can point to large-scale Business Suite deployments on Hana.

SAP co-CEO Bill McDermott set the tone for SAP's new direction at a February investor conference.
SAP co-CEO Bill McDermott set the tone for SAP's new direction at a February investor conference.

Hana is great technology that has its place, leading with analytical uses. And it's not being abandoned by SAP by any stretch. But this week's shakeup represents a return to reason. Sikka's departure might be a bit of a shock, but the renewed emphasis on applications and the cloud was apparent back in February at an SAP investor conference in New York. That's where soon-to-be sole CEO Bill McDermott declared "cloud is where we are taking the company" and where Sikka was noticeably subdued.

"Vishal built [the Hana] plane and he actually got it airborne, and now he hands it off the pilots who will take it to the next step in the journey." That's the interpretation SAP spokesperson Jim Dever shared with me after Sunday's announcement. Not to diminish Sikka's contributions, but SAP can still draw on the formidable technical depth of chairman Plattner, who truly deserves credit as the mastermind behind Hana.

The challenge ahead for SAP will be stepping up its cloud game. Hana is there in the background as the "powered by Hana" platform on which SaaS apps and managed deployments will run. But techno babble about platforms is not why decision makers choose cloud providers. They choose them for their depth and breadth of capabilities and the degree to which they integrate with and complement on-premises applications that, at most large companies, aren't going anywhere any time soon.

The biggest danger for SAP in the short term is a story and momentum vacuum now that it (presumably) won't be going on and on about Hana at every turn. But that's easily fixed by the next strategic cloud acquisition or overdue next steps on more organic strides toward cloud delivery.

SAP has to respond more forcefully to the digital marketing imperative, for example (as have Salesforce.com and Oracle), if its CRM apps are to remain relevant. These and other initiatives weren't going to happen if SAP kept treating every problem like a nail and Hana as the universal hammer.

Can the trendy tech strategy of DevOps really bring peace between developers and IT operations -- and deliver faster, more reliable app creation and delivery? Also in the DevOps Challenge issue of InformationWeek: Execs charting digital business strategies can't afford to take Internet connectivity for granted.

Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of ... View Full Bio

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Timo Elliott
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Timo Elliott,
User Rank: Apprentice
5/14/2014 | 1:42:42 PM
Re: To be fair, goal of HANA was always powering applications...
Doug,

First, I should have been clearer: I'm biased, because I work for SAP (as an "innovation evangelist" -- ie. I hang out with the people deploying technologies like HANA, quiz them about why they are doing it, and share their experiences with others). 

Second, your reaction gets to the heart of the HANA perception challenge. As Hasso's paper laid out, HANA wasn't intended to be a super-fast database for niche needs -- it was designed to simplify existing application infrastructures (and speed was a byproduct of that). 

When you say "even when a conventional database and batch processing would do" and "speedy insights are only required when people are actually in a position to do something with them or about them in an equally speedy way", you are assuming that HANA is more expensive than existing approaches.

We're doing everything we can to make 2014 the year people realize that isn't (or is no longer?) true. By storing information just once, organizations can save huge amounts on every aspect of running both applications and analytics AND do things faster.

It's not just SAP that has this point of view. Gartner calls it "HTAP" (hybrid transaction/analytical processing) and believes it's the future direction for all enterprise applications. Both Forrester and IDC have interviewed customers, crunched the numbers, and concluded that HANA leads to big savings (yes, the studies are obviously SAP-sponsored, but their reputation is on the line). 

The best proof is that HANA is becoming the default choice for new business suite deployments. For example, TRCC, a 500-employee company in Georgia with a four-person IT department, recently chose SAP Business Suite on HANA (instead of a "conventional" database, Sybase). It wasn't because of the speed (they explicilty said in a recent presentation that the "speed increases were just a bonus"), but because of the simplicity of the architecture and the lower overhead (especialy important to them as a small organization.)

If SAP is on the right track, there will be many similar examples in the months to come, and we can let our customers do the talking instead.... 

Regards,

Timo
D. Henschen
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D. Henschen,
User Rank: Author
5/14/2014 | 11:55:14 AM
Re: To be fair, goal of HANA was always powering applications...
Timo,

 

I agree there was early talk of eventually taking on transaction processing and analytics, but application server, in-database analytics, big data strategy, etc. were all tacked on to the original vision. Everying started to be "powered by Hana," even when a conventional databse and batch processing would do. Speedy insights are only required when people are actually in a position to do something with them or about them in an equally speedy way. SAP is pushing ahead of the customer's ability to execute.  
Timo Elliott
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Timo Elliott,
User Rank: Apprentice
5/14/2014 | 11:46:54 AM
To be fair, goal of HANA was always powering applications...
Doug,

I wanted to add some context to this part:

"somewhere along the way these past four years, the promises and expectations heaped on Hana started getting out of hand.

Hana started out as an analytics accelerator and then became a full-fledged in-memory database management system (DBMS). Soon, transaction processing was added to the list of promises, and "radical simplification without disruption" became the rallying cry. Next, Hana evolved from being a DBMS into a platform, packing analytics, application server, and data-management components."

While useable HANA functionality was indeed rolled out in the order you mention, it has been clear from the very start that the goal of HANA was to provide a radical new approach to application platforms -- e.g. see Dr. Hasso's Sigmod paper from 2009, talking about the merits of a combined OLTP/OLAP approach, and even includes a (brief) discussion of its advantages for SAAS (eg cloud) environments.

Regards,

Timo

timoelliott.com
SachinEE
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SachinEE,
User Rank: Ninja
5/8/2014 | 4:35:22 AM
Re : SAP Shakeup Puts Focus Where It Belongs
It is very disappointing on how SAP handle their executive in their transition process. Look at the likes of Leo and Shai, they all went now it is on Vishal, I wonder what is going on, but I think there is a big conflict when it comes to executive level of SAP. It is obvious that public will not take Vishal resignation just as a willing decision even if it was but much will be speculated around it. It is true that his leaving will not have impact on Sap but we have to agree that there will be a little social impact.
VinnieM306
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VinnieM306,
User Rank: Apprentice
5/6/2014 | 1:27:16 PM
Re: Pivot back to apps will not be that easy
Doug, cannot think of too many other European companies with this much exec chaos - maybe Siemens. So, not sure the governance structure is issue. In any case surprised some of SAP's largest customers and investors have not made more noise.

On "neglect" of apps, BYD is old manufactruing ERP, and only a subset. Lots of customers pay  maintenance for retail merchandising, utility billing etc. Where's that focus? and newer vertical apps like I  mentioned earllier, SAP has  been absent. Even with horizontal mobile, social apps SAP  has lagged.

If it was a startup I would agree with your def of apps footprint.  But this is the biggest apps vendor and customers pay it north of $ 10 bn a year to not just do cosmetic updates.
D. Henschen
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D. Henschen,
User Rank: Author
5/6/2014 | 1:02:51 PM
Re: Pivot back to apps will not be that easy
Vinnie,

Agreed on the transitions being too messy and public. Maybe the seeds of that lie in the Euro corporate structure with an Executive Board and Supervisory Board. Ray Wang tells me the CEO is really just the spokesperson for Board, not the all-powerful decider-in-chief.

As for the apps focus, I don't agree there has been "a decade" of neglect. Some neglect, yes, but the Business Suite has been worked over and many Fiori interfaces are in the works. Sikka pulled back on Business ByDesign work just last year -- no doubt to throw more resources at Hana. With money freed up for apps and acquisitions, I think things can get back to a more balanced approach.
VinnieM306
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VinnieM306,
User Rank: Apprentice
5/6/2014 | 11:25:55 AM
Pivot back to apps will not be that easy
Doug, agree with you Vishal is a red herring. His leaving should not have a material impact.

But  2 comments

a) SAP has tried hard to move away from apps. In the last decade HANA was the 4th pivot - NettWeaver, BOBJ, Sybase preceded it.  SAP has been a non-factor in many recent apps areas. I interviewed several of its German customers for last book and SAP is nowhere insurance apps using telematics, mobile banking, next-gen robotics and mass customization etc etc...It was a non player in all the state Obamacare exchanges. I could go on and on. Recent internally developed apps like BYD are duds. So Vishal's leaving will not by itself allow it to pivot back to an apps focus that easily after a decade of neglect

b) For a global company, it is disturbing how poorly SAP handles executive transitions. Shai, Leo, now Vishal. There is something amiss in the corporate governance for such succession planning to go awry so often and with so much gossip and public scrutiny.

Regards

Vinnie Mirchandani
Welju Grouv
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Welju Grouv,
User Rank: Apprentice
5/6/2014 | 11:24:08 AM
Priorities
After his resignation, Vishal Sikka was described as "a very nice man as well as a brilliant engineer, mathematician and [technical] visionary" (Julie Bort). Michael Hickins wrote in a WSJ blog post, "the change could mean a company more focused on customer needs — at the expense of technological vision," whereas Ray Wang asked: "Does this signal a focus on execution over innovation?"

Could this mean a lack of execution and too little focus on customer needs on the part of the CTO? Sikka was an excellent, humble person and I don't know if wanted by all means to be co-CEO or why he did respond to an article of a third-rate hack (Peter M. Färbinger). In any case, your conclusion makes sense.

 One and a half decades before, we watched the transformation to e-business, and now they know what to do about cloud and all of the possibilities associated with HANA. Bernd Leukert seems to be a good choice. Similar personnel changes previously had no big impact on businesses.
D. Henschen
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D. Henschen,
User Rank: Author
5/6/2014 | 10:54:21 AM
There's plenty of database and tech expertise still at SAP
Another reason I'm not too worried about Sikka's departure, he had lots of lieutenants, including many Sybase veterans, who can carry any Hana work forward. And maybe the ASE and IQ databases will get the credit they deserve as the engines handling the high-scale transactions and historical analysis instead of being hidden components within the "Hana" platform.

Maybe SAP does need smooth-talking technologist to keep the tech dweebs happy. Bernd Leukert will have to step up on that front. We're sure to hear a lot more than we have been hearing about all the work going on in Walldorf. And then there's Hasso Plattner, who's still slated to speak at Sapphire next month. I sincerely hope that the platform and in-memory hype will stay in balance. The Hana story has been told; let the customers decide if they want to use it. 
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