- Fortune covered SAP and IoT in an article.
- We evaluate the Fortune’s accuracy.
On May 6, 2015, Fortune published the article Why SAP is overhauling its business for the Internet of things.
I this article, we will check the accuracy of this Fortune article.
At its annual customer conference this week, SAP, the German business software giant, plans to make several announcements that seem designed to appeal only to a chief information officer. But taken together, they are part of a strategy to help businesses cope with the enormous amounts of data created by Internet-connected equipment, employees, or customers. It’s an approach that’s quite familiar in the technology industry of late. Whether you are the chief operating officer of a company that’s trying to track just-in-time inventory against weather patterns, or a chief marketing officer matching your stock price against customer sentiment expressed on Twitter, the techno-industrial giants of the world seek to capitalize on one thing: an executive’s need to gain insight from fast-growing mountains—petabytes—of data. “As an industry we’re still at an exploratory stage of what the Internet of things is going to mean and get our heads around it,” said Quentin Clark, SAP’s chief technology officer. “But its going to turn every enterprise into a technology company.”
Yes, IoT has become a real thing. But Fortune is allowing SAP to carry on about it, without pointing out that SAP does not have much to do with IoT. This is covered in the article Why SAP’s Leonardo Seems to Fake.
Partnerships with GE and IBM
SAP’s goal, like that of GE, IBM, and others, is to become one of the companies selling the shovels and picks of the data-and-services economy that will be built around the Internet of things. (In this metaphor the shovels and picks are tools used in the so-called cloud to analyze and store data generated by Internet-connected sensors. They’re also the platform on which developers build applications that use data to help companies deliver services or new experiences.)
There is no question that SAP likes to sell software. However, again, SAP sells very little IoT software. And again, Fortune is not pointing this out. SAP has a lot of money, and with this money, they can influence or pay Fortune to write articles like this that draw attention away from companies that do actually focus on IoT and do get revenues from it.
HANA as the Basis for IoT?
At the center of SAP’s strategy is HANA, its proprietary in-memory database technology that was introduced with much fanfare in 2011. Without getting too much into the weeds, HANA is a big deal because it can handle massive amounts of data really quickly.
Well, it’s also good not to give such a high-level fly by, that you leave the wrong impression.
HANA was introduced in 2011 and has failed to live up to virtually any of the expectations that SAP set for it. Hasso Plattner stated it would represent 20% of SAP’s revenues by now, where it is nowhere close to that. They predicted they would be the 2nd largest database in the world, and they are nowhere close to that. SAP’s entire strategy for proposing a single database type (HANA’s column-oriented design) for all processing types, is out of step with database technology and understanding. HANA is literally not a “big deal” and it is a very poor investment, especially considering it is easily beaten in performance by competitive products, and being fast is really HANA’s only selling point.
That’s important because one of the central ideas behind the Internet of things is that it will generate a lot of data that people or machines will need to immediately react to. HANA therefore is core to SAP’s strategy.
HANA was core to SAP’s strategy, but that strategy failed. HANA did not grow quickly enough and is now stuck at the 19th most popular database and its growth is has been negative for eight months. This is covered in the article How Popular is HANA?
SAP’s Announcements are Always Accurate?
This week, SAP made one large announcement and a few smaller ones. First, the large: All of SAP’s enterprise resource planning (ERP) software will be optimized to run on HANA in the near future with subscription pricing. This isn’t just big for the Internet of things movement; it also has a major impact on SAP’s business model. Clark did not go into details on pricing, but rest assured, Wall Street analysts will.
Fortune never seems to question whether these announcements are true.
- First, customers should not accept the assumption that it need switch out its database to HANA. HANA has a hard time supporting an ERP system, so the concept that it is optimized to run on HANA is not true.
- S/4HANA cannot be run in the public cloud by anything but small companies because 92% of companies customize ECC. S/4HANA has less functionality than ECC.
- Analysts may get into pricing, but Wall Street is not capable of understanding SAP because they approach the company from too high of a level. This is explained in the article How SAP Mislead Analysts in the Q1 2017 Earnings Call.
Pumping Up Fiori?
When a company that makes its money selling software licenses and hefty maintenance fees transitions to a monthly licensing model, the CFO has a plan to explain how this will impact the balance sheet. From a technical perspective SAP is doing exactly what it said it would do earlier this year, which is transition its existing software to the HANA cloud. SAP’s “next generation” business software suite, S4, will run on HANA and sport a single unified interface across all applications.
Clark is talking about Fiori. We covered Fiori in the article What is in the Fiori Box? However, at this time very few companies use Fiori. And Fiori is not a comprehensive UI for SAP. So Clark’s assertion is inaccurate. What are companies using on projects right now? The vast majority still use SAPGUI, SAP’s old user interface.
Clark explains that this offers a more modern interface for customers—It will look great! It will be responsive on mobile devices!—but it also means that the data sets that customers are using will be stored in HANA and can be re-used across all of their other applications more easily. In many cases, by eliminating the dreaded IT “silos” of different data sets stored in different places, one dumps it all in HANA and can play with it across any application. We’ve heard this promise from the largest IT vendors since 2009, but almost all of them are finally delivering with cloud-based platforms as a service.
The problem with Fiori is that it is primarily a mobile UI. Its technology underpinnings are mobile. But it is not a respected user interface by real user interface specialists and it may not survive. SAP has had many UI initiatives over the past 15 years and they have all failed. Fiori is the next one up.
Secondly, HANA will not be the single database for all SAP applications, so that dream is dead.
SAP’s Fantastic IoT Application?
And it’s about time, because the Internet of things will require SAP’s customers to make this transition, even if SAP has to drag them kicking and screaming. To that end SAP has built a dedicated Internet of Things platform on HANA called, cleverly, the SAP HANA Cloud Platform for the Internet of Things. (The naming is almost as distinct as IBM’s Internet of Things Foundation platform.) The SAP offering includes an asset management product, a predictive maintenance and service product, and several other things you might expect if you were managing, monitoring, and building a business around millions of connected devices.
That has been renamed to Leonardo. But there is still not much there. There are other IoT vendors that are far ahead of SAP, and there is really little reason to purchase any IoT related technology from SAP.
SAP is also signing a partnership with its German industrial counterpart Siemens to build what the two are calling Siemens Cloud for Industry as an open cloud platform for analyzing large datasets in the industry. Like GE’s hoping to use its expertise in manufacturing to make its own Predix software and offerings for the Internet of things better, this is a similar effort, only it looks like it will be shared openly—or at least among developers that want to build applications that will live on SAP’s newly launched HANA store.
This may lead to something of significance or may not.
SAP’s App Center?
Yes, like Salesforce.com has its Force.com store where developers can put applications designed for the suite of customer relationship management software, SAP has built an application store where integrators, customers and others can build applications that will help tie other IT resources into HANA. So far more than 800 have. And this is where Clark gets really excited about SAP’s position.
This is the HANA App Center? If so, this is not a relevant item for SAP projects. I have spoken to vendors who have been enticed to put things out at the HANA App Center, but they have not seen much traction from it. Apps should be inexpensive, but the apps out at the HANA App Center are not inexpensive, they are just partial versions of enterprise expense items.
Because not only will Clark have the tools to make CIOs at big companies happy, he now has the tools to help the CEOs transform the business. The developer-facing platform, where a company’s data can be turned into a valuable asset delivering a differentiated service is where the future lies.
SAP Waxes Philosophically About IoT, and Fortune for Some Reason Cares
Fortune seems very confident of this. Are they verifying anything here or just writing a puff piece?
“For a company to get value out of the Internet of things there are two audiences it has to feed,” said Clark. “Those are business users and developers …and the developer [value] is ultimately expressed on the apps side. If you have a tractor maker and you can sell that tractor maker instrumentation with connected data that offers predictive maintenance and lets him in turn offers services on the other end, that’s going to provide a lot of value for him, that comes back to us.” For SAP, the Internet of things starts with its software, but it’s really services all the way down.
That is nice, but it moves around the fact that SAP has no real IoT business, so why would I care what SAP has to say on this matter? Why not reach out to a real IoT vendor and get their views.
This article by Fortune receives a 1 out of 10 for accuracy. This appears to be another paid placement on the part of SAP to Fortune.
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Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.
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