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Wednesday, October 17, 2012

Tablet Computers to Begin Displacing Laptops

Tablet computers, such as Apple's iPad, are making inroads into corporate settings, but only a small percentage of corporate employees today are using them. This will likely change, however, as tablets and tablet-like devices evolve in their capabilities and form-factors.

Market Definitions Blurring

The market for tablet and tablet-like devices is developing quickly, but there is still quite a bit of confusion. For example, in Intel's most recent quarterly conference call, CEO Paul Otellini wondered out loud about the definitions of the various types of new tablet-like computers coming on to the market.  He said,
When you start seeing an ultra book with a detachable touch screen, is it a tablet? And [if] it's based on [Intel's next generation processor] Haswell, is it a tablet, an ultra book or a convertible? I don’t know. We’ll have to invent some names for these things as we go along but what I can tell you is the level of innovation there is unbounded.
Later in the call, he answered a question the potential for tablets to cannibalize sales of personal computers and laptops.
Pressed by one analyst on how much of the slowdown in consumer PCs was related to timing of Windows 8, versus how much was related to cannibalization by tablets and phones, Otellini said that “I think it’s a bit of each.” Otellini said that once Windows 8 ships, and consumers begin to try it out, “and we have all of the touch-based ultrabooks out there, we’ll know a lot more so we’ll try to quantify that a bit more for you in 90 days.”

In other words, the line between laptop computers and tablets is blurring. Moreover, tablets themselves are evolving in their form factors and capabilities, enabling them to begin to encroach on sales of laptops.

Corporate Penetration of Tablets Low But Growing

When considering the issue of cannibalization, Intel and other suppliers are considering both consumer sales and business sales. But the evidence so far shows adoption of tablet computers is much stronger on the consumer side than the business side.

As shown in the figure nearby, our research at Computer Economics indicates that about one-third of business organizations are supporting tablet computers to some extent among their user populations. However, the percentage of corporate employees actually using tablets is quite low. At the median, less than 5% of business users carry company-supported tablet computers today. These statistics vary, of course, by industry and size of organization.

Although tablet penetration into the corporate workforce is quite low, there are signs that the usage rate will increase sharply in the coming years, based on the percentage of organizations considering these devices or planning additional investments. 

Tablet Capabilities to Mature Rapidly

To this point, corporate PC makers have not had much to worry about in terms of tablets taking market share away from personal computers. Today, most tablet computers, specifically the market-leading iPad, do not have the capabilities of laptop computers. For example, cutting and pasting text on an iPad is cumbersome.

iPads today, therefore, supplement laptops and desktop computers rather than replace them. As the market leader, Apple can afford to deliberately limit the functionality of the iPad so as to not cannibalize sales of its own MacBook laptop computers. However, as other tablet manufacturers catch up and even surpass the functionality of the iPad, Apple is likely to expand the capability of its tablet computer line.

The maturation of tablet computer capabilities will come sooner rather than later. Microsoft's introduction of Windows 8, a touch-enabled operating system that will run on PCs, laptops, tablets, smartphone and other handheld devices, is a full-featured platform. It will be able to run Microsoft Office, the core desktop application suite for most business organizations, as well as single-purpose mobile applications that are so popular on today's tablets. Tablet manufacturers will leverage these capabilities to introduce devices that are much more capable of replacing laptops than the iPad is capable of today. This will force Apple to follow suit if it wants to continue to make inroads in corporate settings. Makers of Android-based tablets will no doubt do the same, as has been rumored.

Tablets Will Begin to Displace Laptops in Corporate IT

Corporate IT organizations are not the ones taking the lead today to push tablets, or tablet-like devices, into the workforce. In most cases, it is individual business units that are forcing the IT organization to support these devices. The pressure generally is coming from sales organizations, field service, or top executives directly, who want these devices to perform simple tasks while traveling, such as checking email, scheduling appointments, entering expenses, and performing workflow approvals.

Tablets are just the latest example of the "consumerization of IT." In this regard, adoption of tablet computers in business will likely take a similar path to the adoption of personal computers over 30 years ago. When personal computers first made their appearance in business organizations, IT organizations were quite happy with having employees use IBM 3270 green screen terminals. It was business leaders that bought those first PCs and then turned to the IT organization to support them. Ultimately, IT organizations took over the procurement and management of desktop computers and addressed issues of connectivity with the corporate networks.

Likewise, today, it is business leaders who are buying tablet computers and pushing their IT organizations to support them. As these devices mature, they will become a standard part of the IT portfolio of most business organizations. At that point, we will see tablets and tablet-like devices take a serious bite out of laptop and desktop sales.

That day may come faster than IT leaders imagine.

Related Posts

Laptops Displacing Desktops: Impact on Support Costs (Computer Economics)
ERP in the Lead, But Mobile Apps Gaining Ground (Computer Economics)

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by Frank Scavo, 10/17/2012 11:50:00 AM | permalink | e-mail this!

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Tuesday, April 17, 2012

SAP’s Mobility Strategy: One Million Developers Blooming

SAP in its press conference last week provided a major update on its database and mobility strategy. In my first post, I outlined my view of SAP’s database strategy. Now, in this second post, I provide my perspective on SAP’s mobility strategy.

SAP recognizes mobility as a critical element of its product strategy going forward, along with social business, cloud, and in-memory computing. But as some of my associates been hammering over the past two years, success in mobility requires SAP to enable thousands of small development firms and individual developers to build applications for SAP. Not just a few large system integrators or ISVs: SAP needs the enterprise equivalent of Apple’s App Store ecosystem.

SAP’s thinking on this front has been evolving. After its Sybase acquisition, it put the “Sybase Unwired Platform” (or SUP, but now renamed, the SAP Mobility Platform) at the center of its mobility strategy. You want to build mobile apps for SAP? Wonderful—buy, borrow, or otherwise get access to the SAP products you want to integrate with, plus an instance of SUP, and have at it. The problem was, however, that this approach limits the number of developers to the following categories:
  • Large or midsize ISV-partners of SAP, who were willing to make the investment in an SAP development environment, to develop mobility apps for sale to current and future SAP customers. This would be a small number.
  • System integration partners of SAP, who had live project opportunities that included mobility apps as deliverables. The SI could use the client's SAP development environment. These resulting apps would be to meet the needs of a specific client, although the SI might reuse the code in future projects. But this approach would produce few apps for a wider audience.
  • Individual developers or small SAP partners who understand SAP’s middleware and development architecture well enough to forgo use of SAP’s platform and can write mobility apps directly against SAP’s back-end databases. This is where many "app store" type apps could be produced. But here is where small developers come up against a brick wall: SAP does not make it easy to gain access to trial or development versions of many of the SAP products that a mobility programmer would need.
For some reason, Oracle, Microsoft, and IBM are able to make life easier for small developers. But for a hint of what it’s like for a small developer to work with SAP, take a look at this blog post (on SAP’s own SCN community site!): Why Does SAP Make This So Complicated?

Two Good Announcements, But More Work Needed

SAP, to its credit, appears to understand the problem. In its announcements, two were especially noteworthy in terms of addressing the needs of the developer masses and in terms of filling out SAP’s own mobile apps portfolio.
  • First, to enable those thousands of developers, SAP announced partnerships with three leading mobility development tools providers: PhoneGap (recently acquired by Adobe), Appcelerator, and Sencha. These will allow developers, working with tools they are already familiar with, to build apps using a new OData connector to integrate with SAP’s back-end systems. In addition, these tools will allow many simple apps to be built without having to rely upon SAP’s Mobility Platform.
  • The second big announcement was that SAP is acquiring Syclo, which has its own mobility platform as well as a suite of well-regarded field service and asset management applications. SAP said that what it is really after here is not the platform (which overlaps functionality of SAP’s Mobility Platform) but the field service apps. This is another step in SAP building out its portfolio of its own out-of-the box mobile apps. Based on my own work with clients, I know that field service and asset management, in fact, are top use cases for mobility in enterprise systems. If SAP can continue to buy or build collections of key mobility apps like Syclo’s, it will begin to fill out the major white spaces in its mobility portfolio, while still leaving much room for third-party developers to fill in the rest.
These are welcome announcements, but will they be enough? I don't think so. These announcements give the developers new tools, but they don't address the problem of getting access to an SAP development system for testing. Some of my associates, such as Vijay Vijayasankar and Dennis Howlett, echo this concern:

Dennis writes,
Needless to say there is a major hitch: developers who want to build apps with SAP data need access to a NetWeaver instance to test and model. Customers would have that, but small developer shops without an SAP license would not have that access without pricey, hair-pulling hurdles, which Sikka acknowledged during the press conference was a “19th century” approach. When pressed on this issue, SAP’s Fawad Zakariya, VP of Mobility and a key player in mobility ecosystem development reporting directly to Poonen, asserted that good news on this front was coming.
In a similar vein, Vijay writes,
I cannot stress enough on the licensing and monetization model to be figured out upfront – without that, access to software is practically meaningless. Developers have a lot of choice today, including many OSS choices. SAP needs a compelling story for them to use SAP technology….

… we are not sure how SAP handles the licensing/pricing in this scenario . And without that clarity coming real quick – I doubt if scores of developers will jump in and start developing cool apps. Sanjay Poonen responded on twitter few days ago than SAP will get it right quickly, and I totally trust him to do so – hopefully by SAPPHIRE in Orlando.
So here we have it. SAP is making significant progress to curry favor with small developers, but it still doesn't have a total solution to enable them with access to test versions or sandbox instances of SAP back-end systems.

Listen to the Developers

Some of my associates are still concerned that SAP has not found the right “pricing model” for mobility apps, but I think that is last year’s debate. Although not part of the formal announcements last week, it appears SAP is working on a pricing scheme that differentiates between major functional mobility apps, casual apps, and even “free” apps. Add in occasional one-off “enterprise pricing” for very large corporate deals, and I don’t think pricing needs to be an obstacle. Everyone can make money and customers can pay appropriately.

But the licensing problems are more systemic within SAP and most likely face legal or organizational resistance based on “how we’ve always done business.”

I am not a mobile apps developer. Therefore, I have no experience on which to judge when SAP will have all the pieces in place to encourage, in the words of SAP, one million developers to bloom. I can only look to those small developers already within SAP’s ecosystem for their reaction—when they are happy, then I’ll know SAP is on the right path. And what I’m hearing from them so far is that they’re still concerned about the licensing issues.

With SAP as the largest enterprise application company in the world, the mobility announcements are welcome news, but we still don’t have a total solution to enable thousands, let alone, millions of developers. I look forward to hearing about progress reported out of the SAPPHIRE conference in a few weeks.

You can watch a video of the entire press conference.

Photo credit: Flickr/docentjoyce

Related Posts

SAP’s Database Strategy Faces an Uphill Battle
SAP in Transition on Mobile, Cloud, and In-memory Computing
SAP Innovating with Cloud, Mobile and In-memory Computing

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by Frank Scavo, 4/17/2012 06:02:00 AM | permalink | e-mail this!

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Tuesday, October 18, 2011

Risks and Opportunities with SAP's Platform Economics

Unless you hang around with SAP developers or independent SAP analysts, you may not be aware that there is a conflict brewing over how SAP wants to charge for its new technology platforms. Specifically, the Sybase Unwired Platform (SUP), which SAP acquired for developing mobile applications, and the SAP Netweaver Gateway, which SAP built to allow third-party applications and devices to connect seamlessly with SAP back-end processes.

The conflict is this: SAP wants to make money, on some basis, for SUP and the Netweaver Gateway, while any fees charged for these platforms discourage third-party development and increase the cost for customers.

Dennis Howlett has been hammering on this subject for many months, encouraging SAP (pleading might be a more appropriate word) to offer these platforms at low-cost or no-charge. He calls it the "Apple model," in recognition of how the free-nature of Apple's development platform has enabled thousands of developers to write third-party applications for Apple's iPhone and iPad. At SAP's annual user conference in Orlando this year, I heard him bring up this point directly with SAP co-CEO Bill McDermott. Bill appeared interested, but non-committal. After the conference, Dennis wrote about SAP's mobile platform, on a downbeat note:
The main problem comes in the licensing model. I find it staggeringly backward thinking that SAP almost invariably finds it necessary to monetize everything that has running code attached to it. That world has been left behind. If SAP could mobilise itself to think differently to the way it is accustomed it could (almost) easily bulk up without having to find another mega acquisition that inevitably amplifies disruption.
Now, just this week, Dennis called my attention to a post written by a third-party SAP developer Graham Robinson on SAP's own SDN site, which strongly confirms SAP's problem:
So let's say I come up with my own killer app. It is an all-singing all-dancing mobile application that will provide huge business benefit to lots of SAP customers. In fact it is so good I can sell the idea to my favourite customers (those that trust me) with a business case that they will jump at. So I have the idea, I have the funding and foundation customer commitment - I am ready to go. So time to decide what technology I should use to build my application with. Let me focus on NetWeaver Gateway but I think similar arguments apply to the [Sybase] Unwired Platform.

....I see NetWeaver Gateway as a programmer productivity tool. It provides a method for exposing SAP functionality using those standards mentioned - but we ABAP developers have been able to do that for years....I am not saying I am not interested in a toolset and/or framework from SAP that does this sort of thing as well, I am. But really the value proposition is that NetWeaver Gateway will save me development time on the backend in publishing the services I want to consume in my application.

BTW - I do not believe NetWeaver Gateway saves me any time developing the front end application despite all the great "app in a minute" demos we have seen. Whether I use NetWeaver Gateway to expose services or I handcraft my own as long as I conform to industry accepted standards the front end development tool should be able to introspect and the runtime consume these services identically.

So back to my killer app. Why should I take the funds my customer has committed to my app and pass some of them onto SAP? Even assuming I could get a straight answer from SAP on what the price would be - why should I do it unless the benefits outweigh the costs? How can a recurring pricing model on a piece of technology be weighed up against the value of saving me development time on a project I already have approval for? And why should I just let dollars go to SAP for my idea? And by the way my customers' employees (the target audience for my killer app) are already licensed to use SAP anyway. Why should they pay again? ....

Returning briefly to the [Sybase] Unwired Platform - how do I justify the cost (albeit unqualified) of this platform against the benefits of my single, albeit killer, app? I can't. And even if I could why would I confuse my customer with extra technology and extra licensing when I don't need to? I wouldn't
....

The real problem is that SAP are struggling to find a way to monetise the millions, probably billions, of users they envisage connecting to their customers' SAP systems via the internet. These will be their customers' customers, their customers' suppliers, their customers' prospects, Joe Average searching for the cheapest widget. Basically it could be everyone in the world with a smart phone.

This is a new-ish problem, but I am sure SAP looked for old business models to learn from. I suspect the business model they took on board is that of the utility companies. IDEA! Let's put a meter on the edge of the SAP landscape and charge for use just like the electricity, gas and water meters on the edge of everyones property. (In case I wasn't obvious enough - SAP NetWeaver Gateway is the meter) Kar-ching! Brilliant! [Emphasis mine.]
Read the whole thing, as Graham goes into more depth in his full post.

Some Monetization May Be Appropriate

After reading Graham's post, I reconnected with Dennis Howlett on this subject. Interestingly, Dennis does see an opportunity for SAP to monetize these two platforms for a select group of customers--its largest customers, who will use these platforms for their own revenue generation. Dennis writes:
SAP believes its largest customers will pay for SUP because they will use it to develop apps for their own purposes from which SAP would likely see little or no economic benefit. These companies - as Gartner has indicated - could easily turn into applications suppliers in their own right, building their own IP on the side of what SAP can offer for the benefit of their ecosystems. The nearest equivalent would be the proprietary EDI mechanisms the likes of Toyota and Dell created which went right through their supply chains.

That's a model I would expect to emerge because the value that can be driven is clear, clean and in the control of the channel master. Therefore, there is a case for SAP charging that fits their model and satisfies the needs of those very large customers. But it will be limited to SAP's top 400-500 customers and does not bring with it a sustainable model. At best it is a series of one-off deals that in total would likely be worth no more than $2 billion in license revenue and $450 million in annual maintenance, based upon past performance, Sybase pricing, discounts, bundling and the like.

However, such models cannot hope to cover all eventualities or for that matter the whole of the market. We can envisage thousands of situational, ad hoc, even one-off applications where the need for fast tracking is paramount or where value comes from volume usage. This is already happening in the Salesforce.com universe where cloud brokers like Appirio are working on a 4-6 week develop/release cadence for proof-of-concept to initial deployments. Having ready access (which has to include easy, clean, cheap licensing) is the only model framework that will encourage those types of developer shop to flesh out the 80% SAP claims it wants to see from its ecosystem. In other words, it is no longer about the fear of leaving money on the table. It is about investing now for benefit that accrues to everyone.
He concludes, "If SAP does that, then it will fulfill its promise of being a good citizen in the enterprise apps landscape."

SAP at a Tipping Point

I'm not sure SAP realizes how precarious its position is, and it works two ways.
  1. SAP charging for the SUP and Netweaver Gateway creates "friction" for both developers and customers. As Graham points out, he has no real economic incentive to develop for these platforms, which will eat into the budget his customers have allocated for his development projects.

  2. The desktop analogy: when you license SAP, do you pay an additional license fee to use your desktop computer as a user interface? Of course not. SAP customers are already paying maintenance fees for enhancements to their SAP products. Why should those customers have to pay SAP an additional license fee to use a mobile device instead of a desktop computer? Even if those mobile applications add functionality to the SAP applications the customer has licensed--isn't that what the customer is supposed to get by paying maintenance fees?
SAP charging for the SUP and Netweaver Gateway further opens the door to competitors, such as Workday, who are bundling mobile applications at no charge. I fear that SAP is just giving customers another reason to consider alternatives to SAP.

My own work with SAP customers tells me that, in many accounts, SAP is not at the center of the action as it thinks it is, especially when it comes to line-of-business users, which SAP hungers after. Many of these customers are actively looking for new functionality, and they generally take a look at SAP's offerings. But it doesn't take much to nudge them into the welcoming arms of another provider, whether it be for CRM, customer service, or --yes--mobility applications. SAP argues that the integrated nature of its Business Suite and ability to support end-to-end processes gives it a strong advantage with its installed base. My work with SAP customers tells me otherwise. Yes, there are benefits to integration. But that alone is not enough to keep customers in the SAP fold when there are strong economic incentives, or perceived functionality advantages, from competing solutions. Throw up an economic disincentive to adoption of SAP's SUP or Netweaver Gateway, and customers may be quick to look elsewhere. Many won't migrate away from SAP, but they'll wall it off and implement new stuff around it from competing suppliers.

The Entitlement Mentality

What concerns me about SAP's attempt to monetize these two platforms is, once again, the mentality of entitlement. We saw it previously with the battle over SAP's attempt to increase its maintenance fees across the board to 22%. SAP consistently gives the impression that, because of its market dominance in the past, that it is somehow entitled, not only to continuing revenue from its customers, but an increasing share. It does not give the impression that it is concerned about losing ground to upstarts in the cloud, such as Workday or NetSuite, or its traditional competitors, such as Oracle, Microsoft, Infor, IFS, or dozens of others with niche industry functionality.

SAP apparently views its SUP platform and Netweaver Gateway as a way to gain new revenue. I view them primarily as a way of keeping the revenue it's already receiving.

SAP's Opportunity

If SAP can free itself from its entitlement mentality, it has an enormous opportunity with its installed base, which is the largest in the world, including many or most of the world's largest companies.

Such companies have a huge legacy investment in SAP, both in terms of historical data and business processes built around SAP software. Many of these customers would love to stick with SAP for mobile applications, which by most accounts will become the primary way that business users connect with business applications. If the SUP is low or no cost for the majority of customers, it will encourage thousands of developers, such as Graham, to embrace it, and tens of thousands of customers to make it part of their applications infrastructure. The same economics apply to the Netweaver Gateway. If SAP really wants to lock-in its customers, it should offer these platforms to the majority of its customers at low or no charge. This will liberate business value to SAP's installed base, ensuring SAP's relevance for years to come.

Whether SAP truly recognizes this risk and opportunity remains to be seen.

Updates: Others have been pounding away on these points for some time. Here are some other good perspectives on this subject.
  • Jarret Pazahanick: Is SAP Using the Right Mobility Strategy. Jarret, an SAP mentor, outlines several ways in which SAP could make more money by not charging for SUP.

  • Dennis Howlett, John Appleby, and Vijay Vijayasankar discuss in this 13 minute video the need for SAP to roll out an Apple-style apps store model, including – in their view – the need to give away the platform. SAP’s progress on mobility is assessed, and they ask, “Is SAP Listening?”

  • Jon Reed covers a lot of ground in his post on SAP at the Crossroads, but be sure to read section 4 toward the bottom on "How Can SAP Win the Hearts and Minds of Developers?" As a bonus, there is an excellent video interview of Graham Robinson who makes many of the same points as he did in his blog post quoted at the top of this post.
I'll add more links as I come across them.

Related Posts

Mad as hell: backlash brewing against SAP maintenance fee hike
SAP innovating with cloud, mobile and in-memory computing

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by Frank Scavo, 10/18/2011 02:50:00 AM | permalink | e-mail this!

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