Hardware beats the software

Today there is news that the latest quad core processors are outperforming software.  This is not a new phenomenon. Three years ago I encountered a problem with an IBM System-i 595 which had 32 dual core processors running in tandem and software that keptanother machine of similar specification synchronised with live data. The server was running a single instance of SAP with 5000 users attached and giving great less than 0.4 second response times, but it wasn’t able to process the data created by reapplying the journals to the second machine. After lots of head scratching and in depth debates with IBM and the software vendor it was discovered that the software was unable to use multi-processes and essentially ran everything in series rather than paralell. The result was that however many processors and cores you had it only ever used one. Rather rapidly the software was amended to take advantage of the hardware capability and all was well.

This does emphasise the importance of ensuring that software and hardware vendors must work in concert to get the best results. But I don’t think it will stop there. We are going to see an even bigger issue with hardware through the capabilities of these processors. That is surely going to be data access speeds. To cope with these high process speeds more and more data will need to be held in RAM or solid state. There is simply a limit to the speed at which data can be read from disks, already the spin speed of the disks is now reaching the upper limits before mechanical and physical constraints are reached – this becomes an ever bigger issue as we find ways of having ever bigger disks in terms of capacity with a real constraint on the number of arms possible.

SAP have been working on processing in memory to get full advantage of the ever faster processors and to cope wth ever more complex analytics. IBM have been working on new data storage media. When, where and what this will manifest itself as is still to be seen.

At home the impacts of the change to multicore can also be seen – the funniest is an old PC Game that my son had. It was hilarious to watch. It was a battle simulation type game that when we upgraded his machine to dual core ran so fast that you couldn’t actually play it!  Needless to say the computer always won.

SAP makes the Inquirer!

I came across this story as a result of SAP’s results announcement on Wednesday. SAPs job cuts has caused the Inquirer to ask of the reductions:

“However the question is what were these staff doing before this month and why are they suddenly surplus to requirements?”

It’s a great question because I guess a consumer of SAP products will be asking what will stop happening now in my software partner  and what does that mean to me?

It does bring me to ask what is going on with some businesses which are declaring record profits yet cutting back on staff. As one wise man said to me – there’s only three ways to make even more money in business, charge more, sell more and cost less. In these strange times the sell more is rapidly disappearing so charge more (if you can get away with it) and cost less seems to have a ring about it!

SAP, SOA and Upgrades.

SAP’s latest incarnation of ERP, ECC 6.0 sits on SAP’s Netweaver platform. SAP Netweaver came along back in 2005 as ECC 5.0 was released. The major difference from the previous version which was really a webserver version was the transition to SOA (Service Oriented Architecture). Moving to Netweaver allowed the coexistence of Java code with the SAP proprietary programming language ABAP. This then allowed you to create webservices that can be held in the webservices repository for repeated use in different scenarios if appropriate. But the great thing is that as well as your business creating webservices so are SAP, and these are what I’d describe as “approved” services.  There are a few thousand of them now and all of them comply with all the GRC principles that a business should follow, along with database consistency checks.

In my mind this is one of the big difference of SOA in an unrestricted world compared to SAP’s SOA. Governance in the deployment of SOA is essential to ensure that GRC principles are met at all times within the enterprise. The SOA environment means that it becomes easier to link to additional solutions outside of the SAP zone coupled with the ability to reuse the services created. SAPs change to SOA promotes B2B and B2C activities which are increasingly important in enterprise activities.

The use of SOA will ultimately reduce the TCO of the solutions especially in the SAP world, as SAP has complemented its SOA environment by providing tools that can feed off the services such as a service monitoring tool like Solution Manager and the beginnings of Business Process modelling within the products as well. The longer term aim, ably demonstrated at last years Sapphire, is to provide an environment supported by services that will allow the Business analyst to both monitor and configure the applications directly.

All this brings me around to  upgrades. If you are an SAP customer sat at anything prior to  6.0 then you will be considering upgrades and pondering over the cost and disruption than may ensue if you go the upgrade route. Well to me the upgrade is extremely meaningful, just for the technology change, never mind the functionality additions. This change from either a client/server or webserver solution (depending on your release level) opens the doors for better control, increased agility and lower costs. None of these should be ignored in these difficult times.

What I find frustrating is that, in my view, SAP haven’t been at all successful in getting this message across to its entire customer base. It’s easy for me to say that, finding the solution is another matter. My personal thoughts are that a combination of examination of the skills of account managers and maybe deployment of  value engineering resources may start to address the situation.

For customers considering upgrades, my advice would be to seek out your account manager and get an holistic value engineering assessment of the benefits of upgrading, you may get quite a surprise!!


Totally by chance (honestly!) this article appreared in computing.co.uk today!

SAP runs licence checks?

As you’d expect there has been a lot of reporting today on SAPs results. I particularly like the piece from ZDNet today entitled “SAP posts healthy results, but will shed 3,000 jobs ” – obviously not about the shedding of jobs but about some of the content of the discussion about SAP increasing its revenue by clamping down on licence usage.  This is based on comments from Gartner. But what becomes more interesting is the last statement .

“SAP is not alone in this,” Payne said. “Oracle and other software companies are going through the same process of auditing and customers notice when their software runs slower as it is being checked.”

Well I can’t ignore this and need to put my experience of this area to print:

  • As all IT departments know businesses in most cases do not maintain an open line to their SAP system for SAP access(there are a few companies who have a special arrangement but these are few relative to the customer base). When SAP come onto the system it is by the permission of the client with the line being opened and good practice is to switch on transaction tracking to ensure that the visitor only goes where it is agreed.
  • Licence Audits from SAP are not new – they have happened for years.
  • The real fun comes if you discover that new roles and users are incorrectly set up.
  • The process is initiated by the customer by a standard SAP transaction and the data submitted to SAP.
  • The amount of system resource consumed is minuscule in comparison to the main business transactions and business reporting.

So as far as SAP running unauthorised licence audits – that is not the case and slowing of system resource has nothing to do with licence audits!!!!

Software Maintenance – it’s a matter of leadership

There’s a great article in Information Week. It’s an open letter to Oracle CEO Larry Ellison on the subject of software maintenance content and fees. It has a bit of the comedy about it but actually it couldn’t be closer to the truth, and does reflect the view of a large number of CIOs out there…….and do you know what ? – it could be what differentiates software vendors.

Who’s feeling brave?

Update: Rimini Street also announced their financial results today at the same time as SAP (coincidence?) and showed a quadrupling of sales, indicating a change in the way CIO’s see software maintenance as a result of economic pressures.

SAP Press Conference – Comments from Henning Kagermann and Leo Apotheker

A synopsis of some comments from Henning and Leo at their press conference

  • Significant Ecconomic conditions are driving companies to revise their strategy or even delay strategy decisions
  • Good performance despite difficult times
  • Now 82,000 customers
  • 2008 a good year with Business Objects integrated well and contributing well
  • Public Sector growth countering difficulties in other sectors
  • But need to look at last quarter showing only 8% growth compared to much better growth in previous quarters
  • Business by design is now operating in 5 countries and SAP are the only company to develop not just a new product but a new business model – SAP are the first company to develop a new product like this.
  • Customer Satisfaction is now at the highest level achieved.
  • Quotes Forrester as IT spend to reduce by 3% this year
  • Enterprise Support was developed at the request of our customers and we are seeing Customer acknowledgement of the value, the price will be what it is within the industry
  • Trust and confidence at this time is the most sought after commodity.
  • All staff will have a salary freeze for this year on the fixed elements – bonus targets related to performance will be paid.

SAP Forward forecast and restructuring cost

Within SAPs reporting of  results was included as expected no detailed forecast of the trading environment going forward and also details of actions taking place within the business to keep things on an even keel.  Within the forward picture reference was made to a provision of up to 300m euros for restructuring although it wasn’t clear whether this relates to just the Business Objects acquisition or the planned reduction in staff, although naturally reducing staff numbers wouldn’t generally generate that degree of cost.

Business Environment and Cost Containment Measures for 2009
The Company expects the 2009 operating environment to remain challenging. In addition, 2009 will no longer include the positive effects from the acquisition of Business Objects, and the 2009 first-half results will be a difficult comparison to the strong results reported in the first half of 2008, which was prior to the economic crisis that disrupted the global markets in the third quarter of 2008.
SAP will continue with its cost saving measures initiated in October 2008 and will take further steps to reduce expenses. SAP will continue to maintain tight cost controls on all variable expenses, including third-party related costs, as well as capital expenditures. Additionally, to enable the Company to adapt its size to today’s market conditions and the broader impact of the global recession, SAP intends to reduce its workforce globally to 48,500 positions by year-end 2009, taking full advantage of attrition as a factor in reaching this goal (SAP will provide further information on its website at www.sap.com). The Company expects the reduction of positions to provide euro 300 million to euro 350 million in annual cost savings beginning in 2010.
“We believe the cost containment measures will allow us to adapt to the tough market conditions and ensure the long term competitiveness of the Company. Moreover, we expect 2009 to be a year of limited visibility, making it increasingly difficult to project sales in this environment,” said Leo Apotheker, co-CEO of SAP. “In 2009, we will continue to deliver to customers products targeted at specific business processes to alleviate pain points caused by the challenging environment since customers need flexibility, agility and visibility into their businesses now more than ever. These products are designed for fast implementations and quick returns on investment.”
Mr. Apotheker concluded, “This is not the first time we have experienced tough economic times and we believe we are well-prepared to endure it. With competitive products, a solid business model, a high percentage of recurring revenues and flexibility in the cost base, we expect to emerge from this challenging environment a stronger and more competitive company, while maintaining a firm hold on our industry leading position.”
Business Outlook
The Company provided the following outlook for the full-year 2009.
Due to the continued uncertainty surrounding the economic and business environment, the Company will not provide a specific outlook for software and software-related service revenues for the full-year 2009. The Company expects its full-year 2009 Non-GAAP operating margin, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects of approximately euro 9 million and acquisition-related charges, to be in the range of 24.5% – 25.5% at constant currencies. This includes one-time restructuring charges between euro 200 million to euro 300 million expected to result from the reduction of the workforce, which negatively impacts the Non-GAAP operating margin outlook by approximately 2 – 3 percentage points. The 2009 Non-GAAP operating margin outlook is based on the assumption that 2009 Non-GAAP software and software-related service revenues, which exclude a non-recurring deferred support revenue write-down from the acquisition of Business Objects, will be flat to a decline of 1% at constant currencies (2008: euro 8.623 billion).

SAP Results in – its tough

SAP this morning posted its results for 2008 – its tough going but its margin still grew by 1.1% with sales up year on year based at current currencies. Leo Apotheker, joint CEO, continues to take action to safeguard their position with a continued tightening on expenses and capital, and an intention to reduce employee numbers from 51,800 to 48,500 or 6% over the course of the year through natural attrition. There were no mentions of enforced redundancies.

Content management – the new battlezone?

About 18 months ago the battle raged in the BI zone with IBM snapping up Cognos, Oracle absorbing Hyperion, and SAP going for the big one Business Objects.

Now it seems that the area of content management is now on the horizon as the next combat area with Oracle acquiring Stellent, IBM acquiring Filenet and SAP placing interests in Alfresco and Newgen. The big debate in this arena is what of the position of OpenText? For sometime OpenText and SAP have worked very closely on solutions in  this area so a logical move is obvious. Who knows in these conditions but certainly one to watch.

These activities does bring into focus the actions of the big three to consolidate the application areas – again something to watch for.

SAP – some analysts views

Yesterday I mentioned that the FT had posted an article speculating on SAP results – 2 analysts stated their views

Wedbush Morgan analyst Michael Nemeroff  repeated his Hold rating on the stock, and trimmed his price target to $33, from $42. Nemeroff is looking for Q4 revenue of 3.439 billion euros, and 67 Euro cents a share, below the Street at 3.545 billion and 70 cents. For 2009, he cut his EPS estimate today to 1.94 Euros a share, from 1.99. “We remain on the sidelines regarding SAP shares as we believe that the recessionary environment could continue to weigh on the company’s software sales over the next few quarters as it did at the end of Q3,” he writes.  “Despite SAP shares trading below their historical average lows, we believe they might not appreciate meaningfully until the macroeconomic environment begins to stabilize.”

JMP Securities analyst Patrick Walravens this morning reiterated his Market Underperform rating and $25 target on the stock. He now sees 2009 EPS of 1.90 euros a share, down from 1.94. “We expect 2009 to be a difficult year for SAP as enterprises delay spending on big application deployments,” he writes. For Q4, he expects revenue of 3.487 billion Euros and profits of 70 Euro cents a share.