A bit rich

You may have seen SAP’s latest advertising campaign, which breathlessly claims that “A recent study of companies listed on NASDAQ and NYSE found that companies that run SAP are 32% more profitable than those that don’t*. Based on a 2005 Stratascope Inc. Analysis”. There are at least three interesting features in this advert. The first is that little asterisk at the end. If you read the (small font) footnote you will see that this excludes all financial services companies. A little odd until you realize that financial services companies these days have two particular characteristics: they make a lot of money, and they rarely use SAP. Could their inclusion have, perhaps changed the results somewhat? Of course one could ask Stratascope, the market research firm headed by a chairman and President Juergen Kuebler, a nine-year SAP veteran, and I’m sure they will give an unbiased and objective opinion. I am going to take a wild guess and say that including financial services companies would not make the figure look better.

However by far the most interesting aspect of this advert is its sheer chutzpah, with its implication that if you use SAP then you will be more profitable: 32% more in fact. Lest the subtleties of statistics have escaped the denizens of Walldorf, I would like to remind them that because two datasets have a positive correlation, it does not mean that this correlation is caused by anything. For example, I observe that my increasing age is well correlated with the steady rise in global temperatures. As far as I know, there is no direct link. Similarly, one could observe: “the stork population has gone up, as has the human population. Hence storks must create human babies”. For example, I can tell you that four of the UK’s five most admired companies last year were Kalido customers (true) yet to say that one implies the other is absurd.

It is particularly implausible to make such bold claims in the case of IT systems of any kind, which may well have distinct and real benefits in individual cases and projects but whose influence on overall productivity has generally eluded economists entirely. The studies there have been are controversial e.g. the 2002 McKinsey study that showed that, other than a few sectors (retail, securities, telco, wholesale, semiconductors IT) there had been no productivity growth whatever between 1995 and 2000 in the US despite heavy IT investment. This study was looking at all IT investment, of which ERP is only a small fraction.

So overall, SAP’s claim excludes a key industry sector to selectively improve its results and in any case makes a claim that is logically spurious and has no supporting evidence. Other than that, excellent. All par for the course in software industry marketing.

Love amongst vendors is fickle

Informatica just announced a partnership with SAP. This illustrates just how difficult it can be for software vendors to develop lasting mutually beneficial relationships, since SAP had exactly such a relationship with Ascential (presumably this is now moot). Reportedly, Ascential got a lot less from this relationship than they had originally hoped, so it remains to be seen whether Informatica will do any better. Just to add to the haze, SAP has been stating recently that its Netweaver brand of technology will do ETL functions itself. So what is a customer to do: continue with Ascential, switch to Informatica, or wait for Netweaver to provide functionality?

I would suggest that the correct response is: “continue whatever you are doing”. If you were using Ascential, then it is perhaps less comforting that SAP no longer promotes this, but the technology clearly works the same both pre and post press release. If you were using Informatica anyway then nothing changes, while waiting for Netweaver to do ETL for you and so obviate the need for a separate tool is perhaps the only dubious choice. SAP’s record with products not at the heart of their application platform expertise is patchy at best. SAP first tried a BI product (actually more than one) in the mid 1990s, then replaced this set with LIS and other tools, then switched yet again to BW and Business Explorer. SAP’s MDM product did not exactly set the world alight. Despite heavy marketing through its vast installed base, it turns out that just 20 customers had deployed SAP MDM by mid 2005 (revealed at an SAP conference). 20 out of an installed base of 18,000 customers is about 0.1% penetration after two years of trying. SAP has since dropped this and bought A2I, and will rebuild a new MDM offering around that, which is another hard lesson to customers that buying from big vendors is by no means always “safe”.

So customers with ETL needs and no committed product yet should just evaluate Informatica and Ascential Datastage (now an IBM product) and let them slug it out. These two vendors emerged as the leaders in the ETL market, with previous pioneers like ETI Extract shrinking to near oblivion, and Sagent disappearing entirely. Only the eccentric and secretive company Ab Initio has retained a niche in high volume ETL, though since customers have to sign an NDA just to peek at the product it is hard to know much about their market progress.

IBM’s relationship with SAP also continues ambivalently. IBM makes a stack of money from services around SAP implementation, and gets some database revenue if the customer runs SAP on DB2, so in principle their relationship should be on solid footing. Yet SAP’s Netweaver announcement put this (including its XI technology) smack up against IBM Websphere in the middleware space, a core business for IBM, who have eschewed the business applications market. The path of true love is a rocky one.

A truly sincere form of flattery

It always pays to keep up with what the opposition is up to, and so I tuned in to a webinar two days ago run by Hyperion on their MDM solution, which they acquired from Razza. This competes with KALIDO MDM, and although no doubt both vendors would argue about the relative merits of their products, these two technologies are perhaps the most deployed general purpose MDM tools today. The interest/hype about general purpose MDM is intense but the number of production instances at real customers is relatively small as this is a very new and rapidly developing market. It is a market long on Powerpoint and short on deployed product. The session was led by Jane Griffen of Deloittes, an expert in MDM and who speaks regularly about it. However when it came to a case study about using MDM in practice, I was amazed to see a Kalido customer case study slide pop up (though, this being a Hyperion event, Kalido’s name was curiously omitted). This creates a new level of tech marketing illusion, with endless potential. Tell people about your product, but show them customer case studies from someone else. This is a great way of plugging holes in your own customer list, and perhaps also deal with any pesky product limitations your own tool has. After all, if there is some area of weakness in your own product, just pick a competitor stronger in that area and discuss one of their customer implementations, implying that it is one of your own.

This has set a precedent in truly original hi-tech marketing. Perhaps one could skip building a product at all, and just present about other people’s customers entirely? It would certainly cut down on R&D costs. Congratulations to Hyperion on inventing an entirely new technique in marketing.

Perception over Reality

A recent article in Infoconomy wonders whether SQL Server 2005 will be “enterprise scale”. Wake up call – it already is. It is intriguing that analysts and journalists continue to perpetuate the myth that SQL Server is somehow a departmental solution, not really up to serious usage. This is nonsense; even in 1997, when working at Shell, I led a piece of research cost of ownership of database platforms and was not surprised to find that the DBA facilities of SQL Server were much easier to use than those of Oracle. What I was surprised to discover was just how large some SQL Server implementations were. Of course SQL Server was originally based on the Sybase code base, which to this day runs many of the systems at giant financial institutions, but somehow the myth of “departmental” had stuck in my mind. Recently one of our customers has been looking seriously at switching from Oracle to SQL Server and has tried running some of its largest applications on it. A trial of a multi terabyte Kalido data warehouse, for example, showed that SQL server was slightly slower on some things and faster on others, but broadly speaking there was no performance disadvantage to Oracle. SAP runs happily on SQL Server, so why does the myth persist?

I think it comes down to marketing dollars. Microsoft does not market SQL Server heavily to the enterprise, and spends less money with analyst firms than one might expect. By contrast Oracle and IBM are marketing machines who constantly stress how powerful their databases are. Hence a marketing perception, unchallenged, becomes perceived wisdom. Microsoft is missing a trick here, as Oracle behaves very aggressively to its customers and will not win many popularity polls amongst its large corporate customers. Some would be very tempted to switch to an alternative supplier, and while switching costs would be huge, part of the reason for the inertia is this perception of SQL Server as a departmental database. Given that IBM was outmarketed by Oracle when DB2 had a clear technical lead, it would be a shame to not see Microsoft put up more of a fight in this arena – competition is good for everyone except monopolistic vendors.