CIO-Reinvented Blog - By Prashanth Rai

SAP Value Engineering…Diamond in the rough

In various panels during the recent MIT CIO Symposium an oft repeated theme was the continued need for CIO’s / IT departments to adopt thinking in “business terms” and not technology. This comment isn't new and is epitomized with the fact that in most cases CIO’s still don't have a seat at the table. Infact according to new survey from Gartner and Financial Executives Research Foundation (FERF), it indicated that CFOs are “increasingly becoming the top technology investment decision maker in many organizations”.

The study revealed that 42 percent of organizations reported that their IT department (and, presumably, the CIO) reports to the CFO, 33 percent to the CEO, 16 percent to the COO, 2 percent to a chief administrative officer, and 7 percent to other officers. (This stands in marked contrast to CIO magazine’s 2010 State of the CIO data, which found that 43 percent of CIOs report to CEOs, and just 19 percent report to CFOs.

In total, 482 senior finance managers responded to the 2010 Gartner/FERF technology study.

So how do IT organizations do a better job at this? SAP probably has one good answer with their SAP Value Engineering group. It got mentioned during the last Sapphire, but looks like they are now ready to take it mainstream.

This effort in the group was initiated by Bill McDermott when he joined the company in 2003. This group tries to address many of the issues that confront IT departments today - Changing the discussion from Technology to business terms, Measuring the business benefits of IT engagements, Putting a framework & methodology in place for business & IT to work with each other etc.

Nowadays building business cases in organizations for IT projects has become common practice – 87%  of organizations do it, but only 4% of the organizations have a formal process to confirm that “defined business value” was delivered.

At the recent Sapphire (2010- Orlando) i attended a session titled - “Best Practices for Unlocking the Value of IT Investments (Value Engineering)” this was a panel that included Dr. Chakib Bouhdary is the Customer Value Officer, Global Field Operations at SAP. Who has responsibility for the Value engineering division. He reports dually to Bill McDermott and Jim Hagermann Snabe, co-CEOs of SAP and members of the Executive Board. The session also included Jeanne Ross from MIT, Mike O’Dell from Pacific Coast Companies & representatives from DuPont & Forest labs.

Chakib indicated that the value engineering team is evolving greatly having completed “benchmarking effort” for more than 5000 companies, with 8000 surveys. At this time they are doing 30 surveys each day.

Value engineering provides a strong process to build a strong value lifecycle for customer IT investments from discovery to optimization:

1. Value Discovery: How do you align your business and IT strategy?
2. Value Realization: How can the business value be captured?
3. Value Optimization: How can you maximize the value from your investment?

Customers / organizations seem to be adopting this deeply in their IT departments creating specific groups focused on Value engineering. Infact during the session the group from DuPont (i think) indicated that they are now providing this a service to other customers/organizations.

Prashanth Rai

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Sapphire 2010 – Day 2 – Keynote – Live Blogging – Part 2

Jim Hagermann Snabe (Co-CEO SAP)

• Appetite & consumption for technology is at an unbelievable height (ipad, tweets facebook stats). The appetite driven by connectivity & mobile break through
• World with a lot of challenges…climate, food, clean water…these are opportunities to innovate.
• At an inflection point, All industries globally after a year and half are looking at growing. Cautious optimism. companies looking for responsible growth. 80s period of economies of scale. IT follows the organizations structure. In the 90’s customer came into focus. Business was trying to be nimble – mass customization = mass production + unique delivery – phase of business process re-engineering. In this phase IT changed, leading to more decentralization. Balance of economies of scale to closeness to the customer needed to be balanced – central + decentralization balance. New inflection point , focus on people not just customers. Every single person has a voice to contribute. now a period of people centric processes. Empowering consumers & employees. Not only optimizing your processes, but the entire value chain till your customer – across organization. Collaboration between people – creating new information flow that is uncontrollable …not system driven. Need for fast decision making…need to empower people across the the organization to make the decisions. Very dynamic / individual. IT responsible rather simple:
  • Applications in the cloud
  • People on the mobile
  • Next generation analytics
• SAP has taken the lead to the new IT paradigm –
  • On Premise – investment value commitment
  • On demand - shared infrastructure read
  • On Device – People any time anywhere
  • Orchestration across these 3 layers – End to End
• On Premise solution, its is the home turf. Business drivers - reducing TCO , freeing up investment for innovation, solving the divide between strategy & execution, drive best practices. Two main categories, business process software – Business suite 7 & analytical processes. Later this year will deliver innovation 2010, delivered through enhancement packs. In memory coming to on premise without disruption. Mantra – Acceleration of innovation at no disruption to the customer.
• On demand, Business drivers – Instant value (no effort form decision to value) , reduction of risk. The downside is shared infrastructure hence reduced flexibility. Two approaches to this space – Lines of business extensions ( John Wookey’s business – read yesterdays post)- Differentiated by seamless integration to the on premise software. Second approach – Integrated on demand suite approach - collection of best practices – Business by Design 2.5 SAP – Better get it perfect before volume. Shipping by end of July this year as a volume product. (Doing a demo of the analytics of business by design – on the IPAD). Announce officially – YOU CAN ORDER BUSINESS BY DESIGN NOW.
• On device – Need access to processes and information to do their job. 3 categories of solutions that are people centric – Collaboration tool (Streamworks – Facebook for the enterprise), Mobility & analytics. No 1 in Mobility, Business process & analytics.
• Committed to the 3 layers, so working on the big challenge – Orchestration. Code named – networked solutions.
• Demo Sales on demand application, Facebook like experience (Seems a lot like chatter). Collaboration is key. Connected to the backend for front end information and back end integration.
• How the stack will evolve – Our role is in the application space – the rest will be done by partners. SAP will focus on the application layer (with a big block on “memory”).  Not try to be everything for every one.
• Been with SAP for 20 year, company has a track record of 38 years of success. Significant impact on the world of business – Ready to take the lead in the people centric world. SAP believes that cloud, in memory & mobility will change the way we do business. Believe in innovation. Innovation without disruption. Allow customer to have choices.
• Committed to a 50% reduction to 2020 of CO2, Launched our sustainability report. Providing full transparency. Committed to be an enabler. Sustainability solutions effect all three layers – On demand, On premise & on device.
• Jointly make the world run better.

Prashanth Rai

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Sapphire 2010 – Day 2 – Keynote – Live Blogging – Part 1

Bill Mcdermott (BM)

• We help best run businesses run better.
• Today is the 100th day as CO-CEO of SAP AG.
• A record setting 50,000 of closest friends at the events.
• Believe in an ecosystem approach
• Companies want to be real-time, unwires & be sustainable
• Real-time – Create insights from all the data, Today's data exceeds yesterday technology – In memory technology. Procter & Gamble is using it – Every Monday have a virtual boardroom with global executives and look at the information in real-time allowing them to take decisions not just from a business unit level , but from an overall organization perspective. Moves people closer to customer / products. Insights changes companies, moves human behavior forward. In the new world managers have to lead and not be information brokers. Real-time enterprise is not just about business, its about the people
• Unwired – Consumers are leading the market, mobility is the new desktop. Enterprise workers want their business apps to be mobile. Enterprise workers are business consumers. Extend end to end processes closer to the action. Mobility will change the way businesses are managed. Mobility also drives adoption. Analytics and insights in the palm of your hand.Leading companies have to mobile companies. CoOp – iphone apps allows access to 13k items, integrated ordering & billing and more importantly the backend fulfillment is also connect to get the ordered delivered in 30 mins – Got the project done with SAP in less than 4 months. Taking bold steps to unwire customers. Why Sybase – only company in the world enterprise software and next generation of business analytics any time & any where.  Welcomes the Sybase community. Will run Sybase as a separate business – jointly share the crown jewels. But will continue to remain open to the ecosystem.Connecting people from the boardroom to the shop floor the results are magical. The soft stuff is the real stuff. This is what leadership is all about.
• Sustainability – Triple play - Economics, Environment & Social. Extract low value operational spend in favor of innovation & growth. Giving the example of HP – building a high performance IT organization – consolidated into an integrated IT platform – SAP. Saving of 1 billion $ – invested in automated supply chain. Drive cost reinvestment to fuel competitiveness & growth. Managing carbon emissions is not only good for environment but good for your business also – Customers will vote with wallets. Example of lexmark – Created a program, changed operation model – slashing 25% of energy usage and reducing GHG. Used SAP to create customer loyalty program – enhancing the brand. In todays volatile digital economy managing risk / customer trust is key. Sotheby's example. Sustainability the leadership challenge of the 21st century.
• All management of SAP world wide & the ecosystem is working very hard to make one thing clear…trust you put into us is very important, and we will do everything to make it a best run business. Trust & success will come one business consumer / customer at a time.

Prashanth Rai

Technorati Tags: sapphirenow,sapphire2010+orlando,keynote,bill+mcdermott

SAP acquisition of Sybase…Another reason

You know the two reasons that we commonly hear of why SAP acquired are the database technology & mobile platforms of Sybase. But based on today’s blogger roundtable with Vishal Sikka (CTO of SAP) another reason seems to be, that SAP wants to get into the in memory database business - they believe that “In memory” Databases are the future of all enterprise applications not just SAP & want to know how to take their “In memory” database technology to market. Sybase brings the capabilities of turning this technology into a product / solution for this market.

On Wednesday Vishal & Hasso Plattner have a keynote on “In memory” database. Vishal also indicated that they were planning to launch a couple of solutions in this space on Wednesday – definitely something to look forward to & track.

The whole in memory technology seems to be also a core pillar of their entry strategy into the Financial services space, allowing large amount of data to be analyzed in realtime. An example of this that Vishal offered earlier in the day was how Mclaren uses the technology to analyze the data from the racing cars / tracks in realtime.

Mobility platform is a core driver of the acquisition, some interesting facts about the Sybase mobility platform:

1. 1.6 to 2 billion text messages go through the Sybase infrastructure every day (i think)
2. They have relationships with close to 900 operators, that is 90% of the market
3. Mobile payment & mobile commerce platform, which is critical to trade in the bottom billion
4. One of the other aspects of the mobile strategy is is the capability to render in any device with native application capability not web apps.
5. Potential – Currently there are around 200k UI screens in the business suite, There is expected to be a couple of million mobile UI screens for the suite.

A clear challenge that exists for Vishal who is now the head of Netweaver in managing the integration of these acquisitions into the core platform, Yes sybase was a partner and there was integration, but baking it into the core platform making it accessible to all services will be a whole different challenge.

Prashanth Rai

Technorati Tags: sap,sapphirenow,sapphire2010,sapphire2010+orlando,vishal+sikka,sybase,mobile+application,in+memory

Takeaways from Sapphire 2010 - Day 1

Below are some of the highlights from day 1 of Sapphire 2010 (SapphireNow)

CO-CEO Influencer meet

• Bill McDermott (BM), Key priorities
  • On Demand
  • Mobility
  • In Memory technology
• Jim Hagermann Snabe (JHS) – Key priority  - Reach out to the customers, the whole executive board has been reaching out customers extensively over the last couple of months.
• Bill McDermott - Focus on reducing TCO – A customer had close to 6000 applications and the IT budget was around 4% of revenue. SAP reduced the application sprawl to 1500 apps & reduced IT budget to 2% of revenue.
• Sybase acquisition Impact on relationship with RIM, JHS …relationship with RIM to continue – need to be on multiple devices, any device strategy.
• JHS - Retail vertical is focused on moving away from the custom / home grown application base to packaged / standard applications. POS analytics & mobility are key for the customer.
• Enterprise support, When offered a choice vast majority of customers went with Enterprise support.
• BBD (Business by design) to get the required financial cover to get started, the key parameter for the business will be number of customers added not profitability or revenue. Focus on building a scale business.
• This press conference was conducted virtually with JHS in Frankfurt & BM here in Orlando. SapphireNow is a great demonstration of use of social media. Some really cool stuff out there.

Meeting with Vishal Sikka

• Three primary objectives:
  • Get products out the door fast (Agile methods of development)
  • Scale innovation
  • Plan for technology platform for the next 10-15 years.
• Sybase incredible middleware
• Innovation for the bottom of billion, An innovation center in South Africa. Enabling small trading in Africa - even for small stores with 5$ per day.
• 100 or so customers have been with SAP for the last 30 years. Not a single one lost.
• Solution manager is key for institutionalizing the relationship between the customer and SAP. Solution manager is evolving, some people who have been able to implement it are seeing phenomenal value from it.
• System design methodology – Work with real customers, read data, real systems. That's the only way to keep development honest.

Meeting with John Wookey

• Focus on building line of business on demand solutions
• Currently focused on sales , sourcing & expense on demand applications
• On demand applications need a different development mindset, CRM on demand the focus is bringing context – communication & collaboration to the CRM data.
• Creating frameworks for orchestrating on demand & on premise solutions – Master data management etc – Cure for SaaS sprawl.
• In on demand applications the customer experience is managed by SAP but hosting is taken care of by partners.
• Discussing internally if they should look at Sales & operational planning as a next on demand application set.
• On Demand – Aligned to the usage based pricing model & subscription model.

Meeting with Doug Merritt

• Doug Merritt has a new role as EVP of On Demand & Business by design.
• SAP serious about business by design goto market, the team has been given all the money / resources they need for the effort.
• Business By Design charter customer period completed, now ready for general availability
• Business by design, coming in starter packs like CRM pack, HR pack etc. The packs will be priced at a lot less. Also the minimum licenses to be purchased for BBD has been reduced to 10 from 25.
• Will look at the current 3000 partner ecosystem to create the much needed partner / reseller ecosystem for BBD. They believe the more mature sophisticated partners will be the first to adopt like iTelligence. Partner will face dislocation.
• Focus on getting partner to build app extensions for BBD.
• They recently closed a deal with “Zero touch”
• Business By design CRM – Execution 3 weeks or less – At fixed price
• Business By Design ERP / PS – Execution 6 weeks or less – At fixed price
• Biggest challenge data migration.
• Compensation model for BBD sales people different from the regular sale people at SAP.

Prashanth Rai

Technorati Tags: sap,sapphirenow,sapphire2010+orlando,sapphire2010,ondemand,saas,bbd,business+by+design,sybase

India – Mobile Ad market

Was just skimming through the Admob-mobile-metrics report for the month of March 2010, Couple of interesting stats:

Its interesting to see that India has the second largest number of Ad requests, It was quite surprising. And it seems to have grown by the highest % by month.

• Looks like there is a significant market potential for Smartphone’s in India
• Currently Symbian seems to 93% of the smart phone market

• iPhone has only 4%, Android isn't even on the map
• Nokia owns the Indian Smartphone market currently

Need to check out the mobile application market in India, that should be interesting too.

Prashanth Rai

Technorati Tags: mobile,nokia,iphone,india,united+states,android,admob,mobile+application

Rackspace – Cloud Focused – Q1 - 2010

Was just looking through the Quarterly results of Rackspace, some interesting excerpts

hosting and cloud computing represent a massive virtually untapped market opportunity for Rackspace. We made good progress in the quarter toward capturing a larger share of its market.

There is a tectonic shift underway that is fundamentally altering the way the world consumes computing resources. We expect the magnitude of this change to eclipse that of past technology era, such as mainframe computers and PCs, simply because there is especially more computing power in the world today.

We are the leader in the hosting and cloud computing industry, and our mission is to aggressively pursue this emerging multi-year,
multi-billion dollar market opportunity.

- Lanham Napier - Rackspace Hosting Inc. - CEO and President

Revenue & Customers

Cloud revenue for the first quarter was $19 million, accelerating to 13% sequential growth from the fourth quarter and 77% year-over-year growth from the first quarter of 2009. Managed hosting revenue increased to $160 million, accelerating to 5% sequential growth from the fourth quarter and a 19% year-over-year from the first quarter of 2009.

We were pleased to see managed hosting customer additions turn positive for the first time in three quarters, even though we actively migrated 135 single server customers to our cloud offering in the quarter.

Return on Capital

Manage Hosting business is a more mature business -- still a high growth, but more mature business than our cloud. And so, our cloud returns at this point -- that business has its scale, so they're low at this point. Now overtime though, when you think about cloud, one of the huge advantages of cloud is that you've got a lot more capital efficiency in that versus our Manage Hosting business. And so our expectations are that we'll get margins very similar between the two businesses, but our return on capital would be much higher because I turns on the cloud will be higher.

Competitive Differentiator

technology advantage. It's just hard to make that durable and sustainable - Our point of difference is going to be around the service that we provide.We're going to write a covenant in our SOAs about what this performance is going to be. So our belief is the way this marketplace works out is there will be segments -- there will be a commodity infrastructure segment where people want to buy for the cheapest price. For people that want that experience, Rackspace is not the right pick.

During the conference call analysts were asking questions about possible competition coming from Azure specifically for dotnet based apps. Given that they have a windows based cloud service in beta.

Prashanth Rai

Technorati Tags: cloud+computing,rackspace,cloud,azure

Amazon Web Services (AWS) Targeting the Fed Opportunity

In the last post we explored how SAP was using AWS, but looks AWS has its sights set on an opportunity that is a lot bigger. Which by itself could change the revenue mix of Amazon, from being primarily driven by e-Retail to being a mix of AWS & Retail. No longer will AWS be bundled in the Other Revenue category.

According to the Seattle Business Journal,

Amazon’s ability to sell cloud services to the federal government could open up a huge new market for the company. The online retailer was an early leader in cloud computing — selling computing power from its data centers on an as-needed basis via the internet. Such services were an early hit with startups and individual web developers, and now Amazon and its competitors are targeting government institutions, which have much bigger computing needs and deeper pockets.

Here is another excerpts from an earlier piece interviewing Vivek Kundra ( Federal CIO )

but his prime focus is on reducing the number of federal data centers and shifting applications like email, document sharing and video chatting from government servers to outsourced cloud computing services.

The Potential -  The federal government will spend $76 billion this year on IT. That includes $20 billion to pay for infrastructure.

How Serious are they?

"In a sign of Amazon's interest in the federal cloud market, the company last year teamed with Apptis, the Chantilly, Va.-based government IT services company, to respond to a request for quotes (RFQ) put out by the General Services Administration. The GSA was seeking information on "Infrastructure-as-a-Service" offerings for the government, including cloud storage, virtual machines and cloud web hosting. 

(Note – That RFP was canceled and a new RFP is to be released)

Source: 1,2

Prashanth Rai

Technorati Tags: cloud,aws,amazon,cloud+computing,federal,vivek+kundra,amazon+web+services