Monthly Archives: January 2013

SAP HANA: disrupting 3 markets, but does SAP have the stones to disrupt itself?

I’ve been immersed in SAP HANA ever since I first heard about it, when Hasso Plattner talked about it in May of 2010. SAP HANA is an in-memory database that computes thousands of times faster than traditional database products.

There are two business lessons that I learnt in this time: first, amazing products are products that disrupt markets and create new markets. Think of the Dyson vacuum cleaner or the iPhone, for example. Second, as Steve Jobs said, “If you don’t cannibalize yourself, someone else will.”

What’s fascinating about SAP HANA is that it has the capability to disrupt four market categories. Even SAP themselves don’t see the full potential of HANA – and that’s fine, because the most disruptive technologies don’t always know their purpose in advance. Let’s get into the detail of these categories and what it means.

1) Database Market

This is the most obvious – SAP HANA is a database much like Oracle, but it runs entirely in-memory. This means it is 1000x faster for many operations and scales linearly. As SAP CTO Vishal Sikka told me this week – “If it runs in 100 seconds with 1 core, it can run in 1 second with 100 cores. That is the beauty of HANA”.

This matters because there are things you can’t do with Oracle that HANA can do. Cancer genome sequencing in seconds. Real-time monitoring of oil drills. Providing offers to customers at a till based on their basket and historic purchases.

In addition, SAP HANA can now be used as the database for all of SAP’s existing Business Suite install-base – 89,000 customers, and it’s a lift-and-shift simple process to move off Oracle. Once you’re on HANA, you can start to take advantage of things you couldn’t do before.

As of now, SAP is the fastest growing database vendor in the world, and overtook Teradata as #4 in June 2012. They booked $800m of database revenue in 2012 (see slide 37). SAP HANA is disrupting the database market.

2) Enterprise Hardware Market

Most Enterprise Software customers run software on expensive mainframe-style hardware. Individual boxes can run into the millions. So SAP built their HANA database on high-end commodity Intel x86 hardware. HANA will run on your laptop (if you have enough memory) and it’s supported by a number of the usual hardware vendors.

SAP expected to disrupt the hardware market, as well as the expensive enterprise storage market, which is based around selling outdated spinning chunks of metal. The market already moved onto solid-state storage and it’s known to be reliable (how many iPhones, iPads and Samsung Galaxies do you see?).

Unfortunately, the hardware vendors like IBM and HP saw SAP HANA as a means to sell yet more spinning disks, and so created hardware configurations with even more of them. SAP got annoyed and invested $50m in Violin Memory, a start-up that has a solution to this. No vendor has yet produced a SAP HANA configuration based on Violin, though I hear SAP bought a ton of them. [update, a colleague tells me that Fujitsu went live with a customer on a Violin appliance, but it’s not officially certified hardware]

So this year I expect further disruption to the hardware market, perhaps with a new entry into the x64 Server market that knows how to do premium commodity. Lenovo, perhaps?

3) Services Market

One thing is for sure: SAP wouldn’t be where they are today without Accenture and IBM Services. Those guys pimped SAP R/3 in the 90s and made SAP the success that it is. In the process of this, they created an even bigger market for themselves – 6-8x larger than the Enterprise Software market.

This really annoys SAP co-founder Hasso Plattner and to quote SAP CTO Vishal Sikka: “we have this strong strategic need to not have the partners come in to implement HANA. If that happens, then we have failed, and Hasso told me that.”

I talked to Hasso about this last week and he was unrepentant: SAP have to solve the services market problem. I told him he had got it wrong and SAP as an SI was just the same as Accenture and IBM and the ratio is not decreasing for HANA projects. If SAP wants to disrupt the consulting market then it needs to do so by facilitation – like the Violin model.

Services disruption is of particular interest for me and I’m always pushing my consulting teams to innovate. I noticed that on a recent deal, the ratio was inverted: 10% Services, 30% Hardware and 60% Software. Of course, we will do more services work once the software is installed, but it gives you a flavor of how the services market might be disrupted, if we can scale our models.

Interestingly, SAP Global Head of Sales Rob Enslin just got put in charge of SAP Services, and he’s an ex SAP Basis consultant. I talked to him last week and he is changing the organization in ways that I believe will support this disruption.

Can SAP disrupt itself?

If you know anything about the Enterprise Software market, you are probably wondering why I missed the elephant in the room: The Cloud. I didn’t, I just left it until last. Here is SAP’s biggest challenge for 2013.

SAP HANA is sold in one of 3 ways. One, you can buy a runtime license for your Business Suite for 15% of your Software Application Value (total of what you paid SAP) per annum. Two, you can buy Enterprise licenses which are bought by the 64GB chunk of memory (minimum 128GB). Third, you can buy 60GB of HANA One on the AWS marketplace for $1 an hour (plus $2.50 an hour for hosting).

Now, Amazon are a very impressive company and they are creating bigger machines – 244GB systems were released last week. As of now, SAP haven’t announced if they will be supporting them and if so, what the cost will be.

However the problem is simple: HANA One doesn’t cannibalize on-premise sales, because you can’t buy 60GB of HANA from SAP on-premise. 120 and 240GB Amazon instances do, however, cannibalize the low-end of SAP HANA on-premise sales and this will have a negative impact on revenue perpetual license revenue.

But the fact is: the world is going cloud. As William Gibson said: “The future is already here — it’s just not very evenly distributed.” – and whilst there are many companies who will run on-premise software for a very long time, companies as big as Pepsi are implementing cloud solutions (they just bought 300k Employee Central licenses from Success Factors).

My view is that in any case, providing a cloud subscription model for HANA can only be a good thing. It dramatically simplifies adoption and – at least for the medium term – there won’t be an option to do cloud HANA for large installations so customers will have to move on-premise at some later stage, and will probably then buy even more HANA. Moreover, Wall Street and thereby the shareholders put a higher value on recurring revenue (Workday is valued at P/S of 41x, whilst SAP is valued at 6x), which should help.

So as for me, there are two crucial questions here:

1) Does the SAP board have the stones to accept a short-term hit in revenue and move to the recurring revenue subscription model for HANA?

2) When will SAP enter the in-memory cloud market? For every $1 they take for HANA One, they are giving away $2.50 to Amazon for hosting. This is money left on the table.

2013 is shaping up to be a very interesting year.

10 tips for dealing with Immigration

This one is for @NeilRaden, whose family member is having problems at UK Customs & Immigration in London. In my experience – and I’ve spent my fair share of time in immigration – there are a handful of things to do to make your life easier. Too late for Neil, perhaps…

1) Dress Smart

It doesn’t matter if you’re going through on a tourist visa to a one-off country, but if you are a frequent traveller or you have a working visa, then appearance matters. I happen to like to travel business-casual anyhow, and always wear a jacket. Don’t pre-dispose someone to judge you because you look sloppy. First impressions matter.

2) Drink coffee, not booze

Need I say more? It may be tempting to have some nerve-calming drinks on the flight, but you need your wits about you at immigration, especially after a long transatlantic or overnight flight when you will be tired. Have a cup of tea or coffee to wake you up.

3) Get prepared

If you turn up to the gate without your forms filled in, or filled in incorrectly, they will send you back to the end, and will judge you. You need to do everything you can to make the immigration officer’s life easier. He or she has enough hassle in a day. Turn up with your forms clearly and correctly filled in, and ask for help if you need it!

What’s more if you are coming on a stamped visa then bring documentation. You don’t have to slap it on the counter up front, but bring it all. Bring a letter from your company stating what you are doing. Bring a letter from your immigration lawyer if you have one. Memorize this information.

4) Wait your turn

So many times have I seen someone walk up to a counter without the immigration officer beckoning them – which often makes them really grumpy. Stand behind the line, wait your turn and they will beckon you.

5) Engage and be friendly

I always start by looking them in the eyes with “Good morning/afternoon/evening sir/madam, how are you today?’. Curtesy goes a long way. Usually, they smile and respond. All of these little things make a difference and predispose a human being towards you.

6) Remember that any border control officer can deny your entry to the country

I took this from Elizabeth Gilbert’s Committed and it is always important to keep in the back of your mind. It doesn’t matter if they are right or wrong – they have the power to deny you or allow you in. Your behavior will control their discretion if there is a grey area. I have had situations where an immigration officer has said “I will let you in this time, but next time you need to do X”.

7) Always answer the question simply, clearly and do not offer excess information

When they ask you a question: “Why are you coming to this country”, answer it with the minimum information. “I’m going to the following conference”. Be specific, clear and brief. Whatever you do, don’t offer them your life story. They want you to go through as fast as possible too and if they need more information, they will ask for it.

8) Never, ever, think you are an immigration expert

Especially if you are coming in on a business visa, be very careful when you are asked the question “Why are you coming in on this visa?”. The answer is: I am doing X (the truth!) for my company, and this is the visa they applied for on my behalf.

9) If they send you to secondary inspection, smile and move on

If you travel a lot, you will go into secondary inspection. The primary officers will refer anything they are unsure about. If you’re not doing anything wrong, don’t worry about it. It’s a process and it can take anything from 30 minutes to 5 hours or more, depending on how busy they are. If someone is picking you up, text them when you land and let them know you are going into immigration. Let them know that you will text them when you are out and not to worry.

10) Be mindful of what is on your cellphone/laptop/social media/luggage

If you go to secondary inspection then never get your cellphone out. It’s forbidden in most countries and they hate it. But also be mindful that they may confiscate your cellphone or laptop and read the contents. So be mindful of what you text and email – even jokingly. I’ve seen people get in big trouble over this.

I added social media and luggage, which I should have pointed out. Neil’s family member had posted “Living in XXX” on Facebook and had a utility bill. If you’re a non-immigrant, these are a fast-track to getting deported. It doesn’t matter what you believe your intentions are, it matters what the immigration officer believes you intend to do.

11) Bonus tip: Never, ever, lie

I’ve spent my fair share of time in secondary inspections in various countries and there is a pattern. Every time I’m sat there, I overhear the same conversation. It’s someone who is lying about their travel and reasons for entering the country. Trust me – the immigration officers – especially the very experienced ones in secondary inspection – know their stuff.

They can see your travel history in most cases. They know everything you told them in the past. And they see people like you every day. So don’t insult them by lying or pretending you don’t speak their language when you do. They get really angry and usually deport those people.

Final Words

I hope this helps someone, some time. What are your tips?


The beginning of Apple’s slow demise has started

Let’s be clear: I’m a big Apple fan. I have been since I was a teenager and I was first exposed to the Macintosh Plus. I’ve been enthralled by their focus on both design and functionality, sometimes without concern to profit, and of the tale of a company that almost went bust, a few times – and then turned into the most valuable company in the world.

But what goes up must come down and I believe that 2012 signaled the beginning of the end for Apple. This won’t happen for some time yet, because they are producing by far the best consumer electronics in the world. But here’s 5 reasons – and countermeasures.

Apple products are just too good.

This sounds like a stupid thing to say, but I own an iPhone 5, iPad 3 and MacBook Pro and they are (almost) the only consumer electronics I use. Each of these devices is almost perfect. Each device is lighter, faster, has better screens and longer battery life than its predecessor.

I love the longer screen on the iPhone 5, the Retina display of all devices and the fact that Apple (finally) ditched the DVD drive. They work seamlessly together and I never leave home with a charger when I go out for the day. They almost never crash.

But with this operational perfection comes a lack of innovation and a lack of soul. I don’t care what the next new thing is, and I’m not sure that it’s NFC, but Apple should be creating it. Apple should be edgy and shouldn’t be afraid to have a product which isn’t perfect. Innovation means taking risks and means cannibalizing your own market.

Proliferation of product lines

I count 4 MacBook Airs, 8 MacBook Pros, 3 Mac Minis, 4 iMacs, 3 Mac Pros, 8 iPod Shuffles, 8 iPod nanos, 4 old iPod touches, 12 new iPod touches, 2 iPod classics, 2 iPhone 4s, 2 iPhone 4Ss, 6 iPhone 5s, 2 iPad 2s, 6 iPad Retinas and 6 iPad Minis. That’s a total of 80 models! And that’s not counting accessories and applications.

Let’s take a simple example of why this doesn’t make sense. In the iPhone5, the cost of 16GB is $10, 32GB is $20 and 64GB is $40. In addition, the cost of an iPhone 4/4S/5 is barely any different. So Apple has a total of 10 models with barely any variance in cost, and a huge variance in retail price.

This might be good for Apple’s coffers but it’s not good for customers. When Jobs came back to Apple he drew a matrix of 4 machines: one desktop, one laptop. One home, one professional. Apple should slash and simplify product lines and get back to where it came from.

Reliance on two aging Operating Systems – OS X and iOS

Apple just put user experience under Jony Ive, who has been charged with creating a unified experience between desktop and mobile systems. The benefit is clear and it’s great in many ways. With each release, the laptop, tablet and phone experience becomes more similar and more intuitive.

The problem is simple: Microsoft, in particular, has created a system which operates how people think, in Windows Phone 8. The live tiles and stream-of-consciousness feeling of Microsoft’s system is the way of the future, and Google’s Android has mimicked this with Google Now.

But Apple, especially with iOS, has a system which creates walled gardens of apps, which you have to switch between. Integration between apps is minimal and you have a sense of being in a hallway with rooms, rather than a stream of consciousness.

Based on the design of iOS and OS X, Apple will never (in my estimation) ever solve this. Instead, they should now start writing the replacement to these two systems, to be released in 5 years. Don’t wait until you’re Windows ME before you create real change.

To innovate you must look out, not in

I don’t believe Apple has really innovated in the last 3 years. Ever since the released of the iPad in 2010, Apple has been obsessively making what it has better. As I said before, this has turned into the best and most polished consumer products ever made.

But the iPad Mini is a horrible example of what happens when you start innovating based on your competitors. It is a defensive play against Google’s superior Nexus 7, and horrible. It’s an iPad 2 in a smaller case, and Apple is capable of so much more, with its purchasing power. I hope they throw it out and start again.

And it is the case with everything they released this year, down to the beautiful new iMac with its impossibly thin edge. Beautiful, better, but not innovative. Apple may prove me wrong by reinventing a new market like the consumption of media, and the Apple TV would be a good place to start.

Charity begins at home

America’s Fiscal Cliff has gained huge global attention, and I believe it will cause a change in taxpayers behavior over the next few years. There will be an understanding that outsourcing manufacturing to other countries (usually China, in Apple’s case) is outsourcing jobs that could be performed in the local market.

When you combine the need to reduce government spending, an increased national debt and Apple’s $41bn profit in fiscal year 2012, I believe that consumers will start to mount pressure to move jobs back into the USA.

There is a sense that Tim Cook knows this already, as he is moving iMac production back to the USA – which is no doubt an attempt to put his toe in the water. There is a sense that with the inflation rates in China, combined with worker productivity, this may be a great plan all around.

Final Words

You may notice that I didn’t moan about the Apple Maps debacle. Such mistakes are human and Apple Maps gets better each day. I’m sure that Tim Cook is already all over creating rich apps that can compete with the quality of Google’s content.

What Steve Jobs, Tim Cook and Jony Ive have done with Apple is amazing, but there are warning signals that Apple has become an amazing company for supply chain and operations rather than a true innovator. And if that is the case, they will fall to the same fate befell that Nokia and Motorola. Good luck Apple!