The Importance of Lying in Enterprise Software

Executive Summary

  • The implications of constant lying in the enterprise software market.
  • Why is lying in the enterprise software space such an advantage?
  • Whey are people so easily fooled by false marketing hyperbole?

Pre Reading

This article describes product which SAP introduced a while ago, which is nothing but a marketing creations.

Background on Lying in the Enterprise Software Market

What the article describes is how so few SAP customers or analyst have picked up on the fact that SAP provides so much false information in the marketplace. This puts all the onus on people like me to explain what are nonsense SAP marketing constructs to the decision makers. Many people seem to assume that SAP must be providing accurate information because they are a big successful company.

However, SAP lies all the time, and extremely brazenly. This extends from anywhere from telling clients about functionality that does not work, to providing false references about how their software has been deployed. I work with and interact many vendors, and I estimate that SAP, IBM Oracle are the least honest vendors in the enterprise software space, and not coincidentally, the three largest vendors.

This indicates that lying is a significant advantage in the enterprise software space.

The Lying Advantage

A company that lies, and gets away with it, has an advantage in the marketplace. Under the on-premises software model, companies implement their software, and they are stuck with it because they have sunk so much money into the implementation. This is why lying is an extremely important component of some, and often the most successful enterprise software vendors. It is similarly important for consulting companies, as misleading clients about what software products is the best for their needs (that is recommending software that has a high billing rate and for which they have resources training in the application) is similarly profit maximizing.

SAP Platinum Consultant

This brings up the topic of an SAP Platinum Consultant. Clients sometimes ask for an “SAP Platinum Consultant” when they can’t get the software to work as advertised. The consultant typically can’t get it to work either, and there are so many parts of SAP don’t work as advertised, because SAP is continually lying about its functionality. However, they are fast with an excuse as to why the functionality should not be able to work because of some reason specific to the client environment. The excuses they come up with are often quite ludicrous, as is described in this article.

A Continually Strong Market for Lying

If you can’t lie to clients, you have very little use to SAP, or to any of the major consulting companies for that matter.  I am sometimes approached by recruiters to work as a sub-contractor to a major consulting firm. I reject these options because I know full well that it will mean lying to clients about functionality. I recently received a call about working for Accenture on SAP SPP for Boeing. SPP has a number of problems, and I knew instantly that Accenture was looking for someone with experience in the application, who will tell Boeing that is a good product it is. Accenture could not care less as to whether the product can be implemented. They want to start billing SAP resources as quickly as possible. Therefore Boeing will be plied with lies, and with enormous consulting puffery in the RFP regarding how committed Accenture is the product and how uniquely qualified they are and how their resources have such deep subject matter expertise. (read the article below on standard puffery in RFPs, and how legally unenforceable they are)

Interestingly, I told the recruiter that Accenture would pressure me into lying (to get the business), and he asked if maybe I could just take the project for two weeks during orals. That is could I just lie for 2 weeks to help Accenture get the business. Having a conversation about elementary morality with a recruiter is a bit like having a discussion on the same topic with an alligator. It’s a bit over their head.

Conclusion

The biggest and most successful companies in the enterprise software and consulting space (lying in vendors and consulting companies is cross reinforcing), and the most dishonest organizations in enterprise software are the following:

  • SAP
  • Oracle
  • IBM
  • Accenture
  • Deloitte
  • KPMG
  • Cap Gemini

There is no regulation of lying in the marketplace, vendors can publish and say whatever they like. The one control against lying is lawsuits, which is an expensive way to regulate any marketplace. This is after the fact “regulation” rather than pro-active regulation. This topic is also generally undiscussed and unpublished. The only time the topic of lying seems to come up is when a client sues a consulting company or a software vendor, and then the accusations are part of the public record.

Accessing Honest Information on SAP

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References

http://law.justia.com/cases/federal/district-courts/california/candce/3:2011cv00381/236529/123

How Common is it for SAP to Take Intellectual Property from Partners?

What This Article Covers

  • What was the xApps program, and how did it qualify as competitive intelligence or corporate espionage?
  • The Wellogix case where SAP conspired with Accenture to steal IP from a best of breed vendor.
  • The role of consulting companies as enablers for SAP’s behavior.
  • The need for regulations on SAP to prevent predation.

Pre-Reading

Some time ago I commented that the xApp program, which was where SAP “partnered” with some best of breed vendors should be terminated.

Introduction

The program did finally become mostly irrelevant (a few partnerships persist), with partners who were ill-served by the program refusing to continue their relationship with SAP. However, what is not frequently discussed is that SAP garnered a great deal of information about best of breed vendors from this program. Many best of breed vendors entered into the partnership with great expectations, but SAP never seriously meant to help them much in the way of sales.

Historical View

However, SAP starting partnerships and then ending them, often with IP that later leads to a lawsuit is quite common. It happened with i2 Technologies and with Commerce One.

History Repeats Itself

This article describes how they mostly did the same thing to another vendor, called Wellogix. The entire article on this case is available in this article. The quotations from this article are eerily similar what has come to be an obvious pattern with SAP. Some quotes include the following:

“While SAP already had an SRM (supplier relationship management module) that could handle some procurement tasks, it was inadequate for “complex services,” according to the complaint. “Wellogix had a working version of this software, and SAP was aware that it worked in a large client environment such as BP.”

After the deal was signed, a number of SAP employees visited Wellogix’s offices for a few days in order to “kick-off the NetWeaver Partner Agreement and perform [SAP’s] due diligence on Wellogix for the purpose of either investment in or the acquisition of Wellogix,” it adds. “During the workshop, employees of SAP went through Wellogix’s P2P software code in person with Wellogix personnel disclosing parts of the code structure.”

But instead of following through with the partnership, SAP used Wellogix’s trade secrets to “replicate the capabilities” of its software and incorporated them into its own SRM products, according to the lawsuit.”

This is all very standard. In fact, after seeing SAP work this way for years, I feel I could have written this script without having actually to read the article. However, the next part of the allegation becomes even more interesting. This is because SAP did not act alone to steal Wellogix’s IP:

“In 1999, BP America hired Accenture to help it “create a paperless (i.e. electronic) process in oil field services,” it adds. “After a thorough review of over twenty vendors, including SAP, Accenture recommended Wellogix.”

In January 2002, Wellogix and BP signed a software and services agreement, it adds. But Accenture then obtained confidential trade secrets from Wellogix and passed them along to SAP, according to the complaint.

Wellogix also sued Accenture in 2008, and won a $94 million jury award against the company earlier this year. Last month, a judge lowered the award $50 million and told Wellogix it could either accept the new amount or hold a new trial.”

And this is also not surprising. I have been writing for some time that SAP is far too powerful with the major consulting firms. In most cases, the major firms simply recommend SAP no matter how poor the fit. In fact, for most clients I work with, the most appropriate software from requirements and functionality perspective is not selected. There are several reasons for this, but one primary reason is that major firms like Oracle and SAP distort the market, making is far less efficient — as an economist would consider it, than the consumer software market. There is a great misunderstanding regarding the nature of market efficiency. Markets do not automatically become efficient through competition. Markets must be kept fair for an efficient market to exist as companies desire to build monopolies. This is poorly understood generally, as even some economists (many who take money from monopolies themselves), do not emphasize it. This is the entire reason for anti-trust regulations, regulations which are generally unknown to the pubic.

Regulation performs the same function performed by referees at any game. A fair game can only be ensured by an impartial intermediary which enforces the civil rules of the game. Those who use the term “free markets” or competition without understanding this feature of markets essentially do not understand the entirety of the history of economics. The efficiency of the enterprise software market is extremely important for the efficiency of the overall economy as is discussed in this article.

Major consulting companies maximize their revenues by recommending SAP, and this is why software selections performed by the major consulting companies are essentially rigged as I described in this article.

Advisement?

There is a concept that a consulting company provides an “advisement” function to their clients. However, with the money that drives the compensation schemes in the major consulting companies, the concept of putting the client ahead of the consulting firm’s revenues has essentially disappeared.

However, in this case, Accenture (which is not only accused but has been found guilty) conspired with SAP to help SAP steal intellectual property from a smaller vendor. This must have caught Wellogix entirely by surprise. However, it shouldn’t have because first of all, Accenture has a terrible reputation for unethical behavior, but also because the major consulting firms like Accenture receive so much of their consulting revenue from SAP that they are almost an arm of SAP. The best terminology I can use to describe the relationship is that they are remotely controlled.

Conclusion

This is a perfect example of how SAP has simply accumulated far too cozy a relationship and far too much influence over other actors in the enterprise market. I am not sure what more evidence the Federal Trade Commission (the body that polices anti-competitive behavior) has to see before they step in to limit SAP’s clear and obvious monopoly power in enterprise software. It has gone from major consulting firms overwhelmingly recommending SAP, even when the solution barely exists, to now a consulting company (and I would tend to doubt Accenture is the only one) assisting SAP in stealing IP from a vendor which the vendor freely shared with Accenture. If the FTC or other body does not eventually stop the behavior, it will get worse because SAP grows bigger every year, and very simply, power corrupts.

Continuing to try to address SAP’s abuses of power with smaller parties litigating against it is insufficient for the task. The litigation undertaken by Wellogix must have been extremely expensive, and a distraction for them, and is not something they should have had to bear. I wish I could have spoken with them before they partnered with SAP to explain how SAP operates. I have been fortunate enough to warn several vendors, and I think to keep them out of SAP’s lair.

All vendors, regardless of their size, deserve protections from predacious companies like SAP. Theoretically, companies are supposed to have similar intellectual property rights. However, that is now how it is in practice. SAP claims and has superior intellectual property rights over other vendors, and routinely violates the intellectual property rights of other vendors. This has been demonstrated in multiple lawsuits, as well as my observation of new SAP modules that have copied much of the functionality of best of breed vendors that they were once “partners” with. This is why it is time to regulate SAP, and not simply leave individual lawsuits as the only defense that best of breed vendors have against a company with $12.5 billion in annual revenues, and that doesn’t seem to think that rules of fair play apply to them.

Accessing Honest Information on SAP

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References

http://www.computerworld.com/s/article/9197887/Update_Oracle_awarded_1.3_billion_in_SAP_lawsuit 

Why IBM Should not be Allowed to Acquire Software Companies

What This Article Covers

  • What happens to software vendors that are acquired by IBM?
  • How is the public interest served by continual IBM monopolistic practices?
  • What conflicts of interest does IBM have as it also provides advisement on software areas where it offers competing products?

Background on IBM’s Acquisitions

IBM is an enormous company that does a variety of things, however the majority of their revenue comes from enterprise consulting. This does not seem to be known by people outside of consulting how still associate IBM with mainframes or hardware services. They also own a large software suite. However, the way they use their software is not like ordinary vendors benefit from their software. IBM no doubt makes a good return from their software, but the main point of the many IBM acquisitions is to sell in IBM consulting services, which are their bread and butter. Their approach is documented in this very good article which has some of the following quote:

“IBM bills itself as a thought leader, but its real business is selling consulting services. To thrive, IBM account managers try to take control of a company’s IT strategy so they can keep pushing new products. Gaughan recommends taking a collaborative or partner approach.”

I have witnessed this behavior first hand as an independent consultant on projects and can say the author knows exactly what they are talking about.

What Happens to Acquired Vendors?

IBM acquires many software vendors, but the evidence is that these vendors gradually lose their relevance over time and that they move from being innovators to laggards in the marketplace. This is not actually that damaging to IBM because they only need their acquisition to be viable for a few years before they are able to make their money back with their lucrative consulting work, which is partially at least, based on their ability to acquire firms.

What Occurs

  1. For current customers of an application, they now are hit up by IBM salespeople, and their application costs increase.
  2. The investment in the software is diminished because IBM is not able to further develop the product very much, and in fact, that is not even IBM’s focus.
  3. IBM begins recommending whatever software they purchases through their consulting business. (how a major consulting firm can objectively recommend products which it sells and maintain its objectivity is difficult to understand)

The Public Interest

The problem with all of this is that its very difficult to see how this benefits anyone but IBM. The determination of what companies can merge is a question for the government and must pass a standard of public interest benefit, or at least that is the official story. For instance the recent attempt by ATT to acquire T-Mobile was not allowed because it could pass a public interest test. ATT wanted the enhanced market power of T-Mobile, but is not interested in submitting to the type of regulation which prevent ATT from gouging customers that would have fewer placed to turn. In fact, generally the government is, in my view, far to lenient on allowing mergers as few mergers actually benefit the consumers or buyers of a product or service. However, these companies are major financial contributors. Interestingly with all the rhetoric about competition, few companies seem willing to compete, and want to grow through agglomerations and concentrating their market power with other companies.

Policy Perspective

Form an enterprise policy perspective, there is an obvious problem with allowing a company to acquire software vendors that it uses to enhanced its monopoly position particularly when there is a tie between a business that partially performs advisement (IBM Global Services) and selling software. It also has a negative effect on innovation in the software marketplace. The product CPLEX is a good example of this problem. CPLEX is a general optimizer that is used as a standalone product, but is also incorporated into many enterprise software applications. For instance SAP’s supply network and production planning modules are powered by CPLEX. However, now that it is owned by IBM, CPLEX has been captured, and I am hesitant to recommend CPLEX to a client because it comes with all the IBM overhead and manipulation of and IBM account manager that is trained to “penetrate and radiate the client.”

This is bad for clients and a waste because it means that my investment into CPLEX is diminished because it is no longer an independent company, and furthermore little future development can be expected from CPLEX. This problem is repeated with any software which IBM acquires, and they have a very large number of acquisitions in their stable. I have a number of good relationships with best of breed supply chain vendors, and if any of them were to be purchased, my relationship with them would probably end as they would then be mired in the bureaucracy of IBM. I cannot in good conscious recommend a product owned by IBM because this allows the “camel’s head into the tent.”

Conclusions

Mergers should be allowed where there is more than simply the improvement to the condition of the acquirer. IBM thinks very highly of itself and continually touts its research capabilities, however, if they are thought leaders why is it that they cannot develop software internally and must continually buy best of breed vendors? Buying companies based upon proceeds from another business, simply to benefit the consulting business is bad from an enterprise policy perspective. For this reason, it makes zero sense to allow IBM to acquire companies. If IBM is good, they would be able to compete in the software business without these acquisitions.

Accessing Honest Information on SAP

  • Want Honest Information About SAP?

    We can help you independently verify the information provided by major consulting companies and answer your SAP questions. Our work together can remain confidential too.

    This article is free, we do not answer questions for free. Filling out this form is for those that have a budget. If that describes you, just fill out the form below and we'll be in touch asap.

References

http://www.sand.com/ibm-microsoft-oracle-sap-customers/

http://news.consumerreports.org/electronics/2011/12/more-signs-that-att-is-backing-out-of-t-mobile-acquisition-attempt.html