Mark Smith's Analyst Perspectives

On Tuesday in Silicon Valley, SAP introduced its latest business software: business analytics applications for specific vertical industries. The event was kicked off by SAP co-CEO Bill McDermott, who demonstrated the simplicity of the applications on an Apple iPad, which has become the demonstration system of choice for SAP as well as a tool it provides for its sales force. Bill and EVP of Business Analytics Keith Costello provided a glimpse of the applications’ capabilities as part of the product launch event. This announcement was expected as SAP has been known to be working on advancing its analytics through its own development efforts and from applications acquired with Business Objects. The announcement is significant for SAP’s ability to compete with IBM and Oracle in vertical industries but has not arrived to their point of also offering independent and cross industry analytics across all line of business areas like sales, operations, marketing, contact center and customer management . Bringing new applications to the analytics market enables SAP to utilize its business intelligence (BI) platform and tools with analytics models and metrics brought together in a package for an industry. Specifically SAP announced 10 applications for vertical industries including consumer packaged goods (CPG), retail, banking, healthcare, the public sector and telecommunications and plans to release new ones on a quarterly basis along with updates.

The CIO of Levi Strauss and the VP of Shared Services at McKesson were on hand to discuss their relationships with SAP and the applications. These organizations have been customers of SAP for some time, and it is not surprising that they want to use packaged applications or that these IT leaders feel allegiance to their key supplier of applications and BI. It is interesting that they recognize business people are using spreadsheets and other personal technologies and intend to get them all onto one technology for their analytics with SAP. That mandate has seldom worked as IT cannot apply enough pressure to those business users and analysts who have day-to-day pressure to generate and use analytics through a portfolio of technology. Most of us at the event were hoping to see business managers on stage to discuss the value of the new products for their business processes and industries. SAP has emphasized its co-development work with customers, but there was no evidence that the applications incorporate intellectual property from customers as speakers validated.

These business analytics applications require organizations to install them on premises with the help of IT and consultants to ensure their proper configuration and deployment. The applications have a dashboard type of approach with navigation, selection and presentation components that have either reporting, analysis or planning functionality but usually not all three together, as you can see in screen shots of the applications. For example, planning and consolidation is the focus for applications in banking, healthcare and the public sector, and analysis is the main theme in CPG, retail and telecommunications. These applications operate independently of other analytic applications that have been part of SAP’s industry and business applications for over 15 years. For example, SAP’s established telecommunications industry solutions have specific market analytics that differ from the new customer retention analytics available in the packaged application. I am waiting for SAP to align all its analytics efforts from separate applications or embedded analytics in its existing SAP Business Maps to make it easier to track and assess. As well it is releasing a series of new embedded dashboards with analytics that tightly integrate into the SAP enterprise applications for CRM, ERP and HCM.

I was hoping to see more integration of the new products with SAP StreamWork for collaborative decision-making and with performance management capabilities in what the company calls Strategy Management, which provides goals and objective management along with a more structured approach to managing performance through the use of analytics. Maybe over time the applications will become more than just analytics or analytics combined with planning; that is also the same approach that IBM and Oracle take. SAP also did not show a roadmap for when they will be available in hosted form or software as a service (SaaS) like its SAP BusinessObjects BI OnDemand offering. SAP did reveal at the event that it is working with Hewlett-Packard to provide the applications in these deployment modes, which have grown rapidly as business users seek to shorten the time to value and use of business technology. This could be an important alliance for HP, which has had little market success with its analytical offering Neoview and its consulting-heavy approach to analytical solutions that I have referenced in recent issues with Oracle.

For SAP overall the new products bring together pre-built integration and information management with its BI platform and tools with prebuilt applications and content; the latter help organizations reduce the time to assemble and develop analytical applications that address some of the key issues found in our new benchmark research on analytics. The research found that business people are not satisfied with IT’s current approaches because applications are not easily accessible and data is not available on a timely basis; this is part of the reason that the business side increases use of spreadsheets and presentations and looks beyond IT for assistance. Business also is looking for faster and more readily available search and navigation across analytics, along with making them more adaptable to all levels of business. SAP addresses some of the accessibility and simplicity issues by making the Apple iPad a platform for its business analytics. SAP has raised the competitive bar in analytics applications for IBM and Oracle; now it must build credibility and loyalty among business customers, who have been diversifying to smaller, more tightly focused providers for their specific business needs instead of waiting for IT to catch up and stop assuming it knows what they need.

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Regards,

Mark Smith – CEO & EVP Research