What is ERP

I received a couple of followup questions on the topic of ERP as well as a question regarding whether Best of breed is about to make a comeback, in particular inside the core ERP domain. so instead of getting deeper in talkback land, I figured to post another one on the topic and clarify. I was also told that my posts are too long to read, so I will try to go shorter.

There is no doubt that ERP, which was a key differentiator for companies 10 years ago has become more context for some of the companies today, and for those who had bad implementations, even worse a costly commoditized set of processes (and if they picked a non-SAP product, a costly legacy set of processes). For the companies that know how to use ERP as a strategic asset there is no doubt that a great SAP implementation is a core component of their differentiation. If you ask Niall O'Connor at Apple as a CIO of one of the fastest growing consumer focused brands in the world what was the secret sauce behind their success - and no doubt he will point out the speed of their execution on iTunes, their scaling of supply chains for iPod, and the volume they run through their retail business as great proof points to the amazing role ERP plays at Apple (right behind the genius that Steve Jobs brings to the product design/strategy table). By the way, Apple's implementation of SAP is one of the most inspiring uses of technology in the enterprise. I hope one day to get Niall's permission to share with you some of the stories behind the scense at Apple.

Without a strong core ERP you cannot scale a company and you lose scale even on successful strategy. That is core - that matters. What is context, is a stale implementation that does not allow you to change corporate processes with any agility. What is interesting to ask in that case is what effect does best of breed have on that agility - hence on the value of these application assets. Well, the more applications you have designed separately, the less you can afford any change and the more you invest in the gaps between them. As a matter of fact, I believe Oracle's customers should hear the famous British Tube warning (that is their subway not their TV...) "mind...the gap!!!". If you have not been to the London underground, you will not get the story, but if you have been you know that the tube was badly designed so that there is a gap in some stations between the train and the platform, and yet instead of solving it, there is a big voice that just reminds you not to fall.

Does it mean that you should yank out every thing you have and install one vendor's software and nothing else. Probably not, you should evaluate carefully what makes sense to yank out, and what makes sense to interface, and phase out over time. The close to the core processes the harder it is to live with best of bread. But on the edges, I definitely see things on the boundary line of ERP that will get interesting offers from many vendors. Enterprise SOA was the way SAP designed a way to integrate these offerings by design, not as an afterthought. Vendors that will take advantage of that set of interfaces will not only help the customer spend less on technical plumbing, but more importantly make sure that the systems evolve over time in conjunction with the core engines.

The issue with best of bread is that like most products we buy in life, we can only sense the cost of acquisition, not the full life cycle cost. You pay for best of breed by moving away from buying software and into building systems. I believe that long term the market will always move away from building one off and into buying en-masse. It is just the direction that water and costs flow - downwards. the main issue we have to focus on is simplicity - and that is the gene that I was working on the most at SAP - simplifying our world and our customer's world.

Shai

ps. I was told today that someone cheered regarding my departure...I heard that is becoming a more popular sport these days in some parts of Europe. I promised that I will take myself lightly so I decided to link over to that post, but I read it first to see if he had a base in reality to anything he said, but since he must have lived in some distorted reality field, I figured you don't really need to read it...

Comments

[Mario Herger]

Don't mind the "cheers", I found it just plain stupid...

BTW: I hope that you succeed and have an impact with your new projects. Having a Ph.D. in Chemical Engineering and having provided with my thesis the exhaust emission factors for Austria for the Kyoto Protocol, I am fully supportive for these activities to protect our globe.

[Sadagopan]

Shai - welcome to the blogosphere!! As i write http://123suds.blogspot.com/2007/04/shai-agassis-new-blog.html here, the big companies take years and years to upgrade their software to cope with technological advances and when corporates struggle so much to upgrade to new versions- besides being costly, upgrades are becoming quite tough to execute. The joke amongst CIO community is that one-in-three CIO's may lose their job at the end of an ERP upgrade exercise( This is just a general comment).In general, customers also talk about difficulties in reconfiguring applications ( the reality is far from the easy reconfig flexibility that they hear during salescycle). The reality is that best-of-breed may find takers at different points in time by business - though they may over a period of time try and consolidate, by then some other business in some other part of the world would fine best-of- breed to be appropriate for their immediate or specialized needs. The business ecosystem needs such players to thrive and in a way push the big players to move fast!.

[Alok Pant]

Shai: As someone who has been with SAP in the recent past, and from feedback I have got from some customers, your presence at SAP will be missed. I will personally miss your charismatic presence at Sapphire this year, unless you will be springing a pleasant surprise on all of us. Wishing you all the best in bringing electric vehicles to the world.
Regards,
Alok Pant

[sig]

Shai, welcome to the blogosphere!

Now when venturing into the green and eco-friendly field do not forget your background from enterprise software - a "technology" often forgotten in the search for sustainability!

"Green" mostly invokes "less use of resources" all the while we forget the other part of the equation, the "more efficient production" of whatever we need. That's where rethinking enterprise IT can do even more for the environment than rethinking car propulsion units... but I suspect you know that well ;)

[Elke Speliopoulos]

Shai,

Don't let those wagging tongues get to you. I read this and just shake my head. The comments are mean-spirited and discredit what you have done and the creativity, innovation and, not the least of which, success you have brought those customers who have been deploying SAP's solutions.
I met Shai Agassi as a man who truly cares and who has great passion. You will succeed in whatever you touch.

Keep it up.

[Dimitar Vesselinov]

Shai, I'm happy to see that you have joined the blogosphere! I'm sure that your next endeavours will be as successful and impactful as your previous achievements.

[kartoffel]

Hi Shai,

Just for inspiration:

http://www.cargocap.de/index_en.html

Make this a little bit smaller (maybe as pneumatic delivery) and connect homes or households together with central hubs. It will be the next generation of the internet but not just for information rather then materials (people included). Cars not needed anymore.

Greetings,
Kartoffel

[Rick Bullotta]

Hi, Kartoffel.

The CargoCap concept is a cargo version of what I was calling the "MyPod". Imagine that you had a personal transportation "space" that could be transferred to from a car-like chassis to a high-speed rail system, to air travel, or anything in between. Optimal utilization of the most effective and efficient mode of transportation depending on the travel segment, highly personalized environment (media, comfort, etc.), and so on.

Another must read for any "travel of the futurist" is "The Roads Must Roll", by Robert Heinlein.

To infinity and beyond,

Rick

[kartoffel]

Hi Rick,
cc Shai

Thanks for the reading hint.

My assumption is that the Internet right now is not complete. I can buy books or CDs or DVDs or milk 24h a day and 7 days a week. But then a lot of lorries will enter the road and I have to wait several days up to weeks to get the stuff finally (UPS). My vision is to connect all houses with a pneumatic delivery pipes and based on this infrastructure goods can be deliverd in (near) real time.

A prototype project could be to start with a super market as central dispatch unit and then connect some houses around. Order products from the market via WWW and then send it with air pressure to the house using container in the pipe.

Greetings,
Kartoffel

[A well wisher]

In ERP business world only a few will “cheer” when a man like shai leaves. But that will be from oracle. If any of the colleagues done it, It is a plain stupidity due to lack of knowledge and awareness.

It could be some who does not want to come out of legacy comfort zone.

I am not much aware of so called “policies” so not putting up the contact info

[Bjorn]

In business there are always a lot of politics, between people for positions and power and different vision and pride that people have. I am sure there were a number of people who dislike SAP going into things such as JAVA, thinking that it took focus away from ABAP for example. The same might be true regarding having a "foreigner" on the board and some German pride might have been hurt as well as some people might have thought that Shai got the promotion that they themselves felt they deserved. You cannot rise quickly to the top, shake up a company both technically and culturally without creating some foes. With all due respect for Germans, they are conservative people and Shai, you might have been the polar opposite sometimes. :)

[Mark Felix]

Shai, I am interested in booking you as a guest speaker for a major technology client of ours. Can you please advise your contact info? Thanks,
Mark Felix
Director of Entertainment Services
Drury Design Dynamics
49 West 27th Street
New York, New York 10001
(212) 213-4600 x211
[email protected]