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How SAP Can Derive Maximum Value From Its Sybase Acquisition

Sunday, June 20th, 2010

SAP’s proposed $5.8 billion Sybase acquisition has generally received rave reviews for potential synergies, but big question marks loom relative to its ability to achieve a sufficient return on its investment. SAP, after all, offered Sybase shareholders a 44% premium over the market and, to make matters worse, SAP made its offer immediately before the current market correction.

No question, these factors, combined with normal execution issues and SAP’s scant experience in integrating big acquisitions, will certainly complicate matters. Even so, the acquisition has the potential of producing big gains.

In generally declining order of importance, product synergies include SAP’s access to Sybase’s:

  1. Industry-leading SQL Anywhere mobile database and its entire Sybase Unwired Platform suite, which will allow SAP to mobilize its applications, as well as allow SAP customers and partners to mobilize and connect their own applications to those from SAP;
  2. IQ analytical database, as a state-of-the-art analytical engine for SAP’s applications and foundation (especially with a Business Objects front-end) for a much-needed integrated analytics appliance; and
  3. ASE database, which will provide the bulk of initial revenue and profit attributable to the acquisition, eventually provide SAP with an additional database platform, and may possibly (although this is a long shot) allow it to reduce dependence on competitors’ RDBMS platforms.

(Deeper, much more comprehensive discussions of SAP/Sybase product synergies have been written by analysts including Merv Adrian, Paul Hamerman, Dana Gardner, Dave Kellogg, Curt Monash and Dennis Howlett.)

Access to Sybase’s mobility suite will almost certainly deliver the first, and probably the greatest technology-based benefits. Additional products such as IQ and, to a lesser extent ASE, will provide somewhat lesser benefits and will take longer to integrate into the SAP line.

Sybase, however, will also provide SAP with a number of critical, albeit less tangible benefits. These include Sybase’s:

  • Strong position in global-scale financial services, and to a lesser extent telecommunications accounts, into which SAP can sell its software;
  • Rapidly growing inroads into the Chinese market;
  • Infrastructure technology portfolio which SAP can integrate with its growing portfolio of mid-market and hosted applications into turnkey solutions to smaller customers; and its
  • Strong and incredibly stable management team.

This last point merits particular attention. The Sybase management team has been one of the most stable in the IT industry. Much more importantly, it has done a phenomenal job in first stabilizing and then transforming a company that had a confused product line and over-reliance on an aging RDMS with declining market share. Operating on a relative financial shoestring, it stabilized, upgraded the technology of and significantly expanded the market for its legacy ASE RDBMS and developed IQ into industry’s leading columnar analytics database.

Most importantly, it was one of the first companies to recognize the need for—and the first to dedicate itself to building—a comprehensive, enterprise-level platform for mobile applications. From hindsight, this may appear to have been a sure bet. In reality, it was anything but. During the early years, the growth of the enterprise mobility market was far from certain and much larger, better positioned competitors—companies including Microsoft, Oracle and IBM—were talking of making major pushes into the market. And all the while, Sybase had to find the resources required to fund this speculative business while simultaneously struggling to stabilize its legacy RDBMS business.

Not only did John Chen and the Sybase management team successfully navigate the dangerous tradeoffs inherent in reinvigorating a declining legacy business while building the foundation for a still speculative new business opportunity, it did so while slowly, but steadily, growing revenues and operating income. And don’t forget total shareholder value, which it grew from less than $500 million in the late 1990s, to $5.8 billion (which SAP will pay). Best of all, its execs did all while continuing to be some of the nicest, most open people in the industry.

There is no question. SAP must certainly capitalize on the extensively discussed product synergies and the lesser discussed market synergies if it is to derive value from its acquisition. The greatest value, however, may well come from an ability to harness and leverage the chemistry of Sybase’s management team.

Posted in IT Company Strategies, IT Industry and Companies, IT Industry Trends, Other IT Companies, SAP | No Responses »
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The Benefits of SAP’s Virtual Community Activities

Monday, August 24th, 2009

Last week’s blog provided a brief history and state of the thematic evolution of SAP’s online community-building capabilities. Beginning with the unabashedly technology-focused SAP Developer Network, SAP has gradually extended its community initiatives to help its traditional technology-based audience develop a greater sensitivity to the needs of the business.

More importantly, it has launched a number of new initiatives, including its Business Process Experts (BPX) community, SAP EcoHub partner product community and a growing number of private, invitation-only communities that are targeted largely at business users. BPX, in particular, provides a vehicle by which SAP experts and business analysts from multiple companies can share ideas and best practices for adapting SAP software to ever-more demanding business requirements.  

The Beneficiaries of Community

Such communities have the potential of providing value to multiple constituencies. For example:

  • Customers may benefit from faster, higher-quality implementations; fast, easy access to experts; and a means of connecting with and learning from peers and, in some instances, from trading solutions with other customers;
  • Partners gain improved access to global ecosystems, an online product marketing and sales channel (in the form of the SAP EcoHub), a forum in which they can more effectively expose their qualifications and an opportunity to get invited to bid on areas in which they have demonstrated expertise to the community.

True, such benefits are broad and generally anecdotal. The closest SAP can come to verifying such claims are detailed participant reviews that claim 20-30% reductions in the time required to solve problems and that praise the role of communities’ roles in helping them get promoted and, in some cases, receive job offers from other companies. A number of system integrators, meanwhile, claim to now rely on SDN and BPX as the first line of training for new recruits.

But while SAP’s communities certainly appear to deliver value to each of the company’s constituencies, they arguably deliver even greater value to SAP itself. They provide the vendor with many new opportunities to reach and continually engage with customers, to improve customer satisfaction and to obtain continual feedback on existing products and services, customer needs and opportunities for new offerings. The vendor also claims these forums have helped speed new product ramp-up, improve product satisfaction and reduce technical support costs by allowing members to provide support on non-critical “how to” topics and free SAP’s own staff to focus on higher value services. 

The Critical Role of Web 2.0

SAP attributes much of this value, not to speak of the stickiness of its communities, to its extensive and rapidly growing use of Web 2.0 social networking tools. For example, it has begun to use wikis to engage the community in creating product documentation and is beginning to explore the use of gaming models to facilitate learning and more effectively engage Millennials.

It is also using social media techniques (such as allowing communities to be orchestrated, rather than trying to manage them) to engage users and concepts such as community ratings, contributor recognition systems and rewards programs. The rewards, consisting of free software and attendance at SAP conferences, preferred access to support and copious amounts of very public recognition, have proven to be extremely effective in encouraging participation by the roughly 70 SAP Mentors, 4,500 bloggers and 7,000 highly active contributors that are so instrumental in delivering value to their communities.  

Lessons for the IT Industry

SAP is certainly making extensive and effective use of online communities in helping its customers upgrade their SAP skills, their partners to promote their products and services, and SAP itself to speed new product ramps and offload some of its support requirements (and thereby increase the level of value that can be provided by SAP’s own support teams).

But for all its experience and success, SAP is hardly unique among IT vendors in developing online communities or in using Web 2.0 tools and techniques to facilitate or reward participation. Every leading vendor provides similar communities, and some make even greater use of Web-based tools, such as in allowing members to develop and test software, learn through the use of interactive online games, and in rewarding valued participants.  A number of vendors encourage their executives to launch their own blogs.

SAP, however, is clearly among the leaders in extending its online communities beyond technologists and in attracting large numbers of business professionals to share their own learnings. This is a huge challenge:

  • First, business users are much less predisposed to spend time navigating huge banks of online postings and ramblings than are technologists, some of whom are as interested in exploring the capabilities of new social computing tools as they are in addressing actual support requirements; and
  • Second, business users are more often dealing with issues that are company-confidential or that may otherwise harm the company if they fall into the wrong hands.

But while engaging business users in productive online forums may be difficult, it is becoming increasingly important. Although line-of-business executives have always been involved in the acquisition of IT tools, their role is growing.

At a time when many companies are limiting or actively cutting the size of their IT budgets, more and more projects will require not just the support of business executives, but their active sponsorship and funding. Just as importantly, executives must be convinced that a new expense will deliver true and demonstrable business value. As is the case in technical communities, the experiences of peers in other companies, and the willingness of people with similar experiences to help in the quest for business value, can be powerful tools in motivating a purchase.

Posted in 21st Century Careers, Business Trends, Community/Other Colleges, Creating the 21st Century Workforce, Education System and Institutions, IT Company Strategies, IT Industry and Companies, IT Industry Role in Education, Other Schools, SAP, Skills Requirements, STEM Careers, Technology's Impact on Job Skills, Universities and Grad Schools, Workforce Trends | No Responses »
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The Role of Virtual Communities in Enhancing SAP Skills and Business Value

Sunday, August 16th, 2009

My July 27 post examined IBM’s University Initiative, and what I see as an emerging, best practices-based approach for training prospective employees and customers for the IT-based jobs of the future.

 

Other IT vendors are pioneering other types of approaches for continually updating and upgrading the skills of IT professionals. Consider, for example, SAP’s “Communities of Innovation“—a combination of about half a dozen online community-based initiatives that have attracted more than 1.7 million members (growing at a rate of 20,000 to 30,000 per month), about 70,000 of whom contributed over the past year.

 

SAP Developer Network as a Community Prototype

SAP’s first, and by far its largest community-building efforts are focused on technologists—developers that customize SAP applications around specific customer requirements and the IT staffs that develop and manage the infrastructure on which the applications are run. These programs, combined in the 1 million-plus member SAP Developer Network (SDN), are intended to help SAP developers, analysts, consultants, integrators and administrators collaborate to address technical challenges, handle day-to-day administrative issues, identify new opportunities and learn about new technologies.

 

This Internet-based forum, which is augmented by physical meetings (such as SAP’s TechEd and local Tech Tour conferences), are—and will continue to be—the company’s largest, highest-priority community-based initiatives. But while technical education, support and community will always be critical to SAP customers and partners, these technical confabs are taking on an increasingly business-focused slant. They are being increasingly used as vehicles for helping technologists deliver greater levels of value to their organizations by becoming more engaged in the business and by playing more active roles in addressing business problems.

 

From Technical Communities to Business Communities

However, like most other vendors, SAP recognizes that expanding the business acumen of its traditional technical constituencies is a necessary, but not sufficient condition to establishing its tools as critical business solutions. It must reach more directly to line-of-business customers as a means of:

  • Better understanding the capabilities these people will need in the tools of their future, to ensure that SAP tools will become even more relevant to their needs;
  • Helping business executives understand the value that SAP tools can deliver to their organizations, since these executives are playing increasingly central roles in driving and funding technology purchases; and
  • Ensuring that business users understand how to derive optimal business value from these tools, so as to cement SAP’s role in these organizations’ businesses. 

 

So while the vendor will certainly continue to build and empower its technical communities, it is becoming much more aggressive in developing and empowering business communities. Its Business Process Experts (BPX) community is the largest and most mature of these initiatives. BPX, which currently numbers more than a half million members, is intended to help customers—a combination of business executives, analysts and developers—share and collaborate on the creation of best practice-based business processes. The community provides process learnings and moderated collaboration across 18 of the vendor’s 26 target industries, as well as horizontal application areas such as ERP Financials, HR management, supply chain and customer relationship management, and a number of cross-industry business themes such as change management, sustainability and value engineering.

 

Newer communities similarly target a combination of technical and business users. For example, SAP’s:

  • Business Objects Community, built around the business intelligence and reporting software SAP acquired in 2008, helps approximately 400,0000 business and technical users gain greater business value from these tools while simultaneously demonstrating the value of efficiency attributable to reuse of existing objects.
  • University Alliance Community, launched in February 2009, already consists of 60,000 students (a combination of business and Information Systems) and professors from 1,000 universities around the world. Members are also encouraged to participate in SDN and BPX, collaborating with professionals to ensure that they understand how the software is used in practice, as well as in theory.
  • SAP EcoHub, a listing of and interactive community built around the partner products designed to be used with SAP, allows customers to rate, share experiences and provide unbiased feedback around these products. 

 

The Growing Role of Private Communities

Each of the above-mentioned communities is public and is open to anyone who wishes to join. The results are available to all. Such open forums are ideally suited to most types of technology-based discussions, where participants are generally comfortable in engaging in open dialogs and where more value can typically be gained by sharing, than by keeping information proprietary.

 

This, however, is not always the case with business users, who may be comfortable in openly discussing general concepts, but reluctant to share best practices with current or potential competitors. Therefore, SAP also sponsors a growing number of private, orchestrated communities that are open only to a relative handful of specifically invited guests. For example, these communities may be dedicated to specific business processes, in which perhaps a dozen customers and partners may be invited to participate in an SAP-moderated forum around core business needs or common processes.

 

SAP, meanwhile, may also have a need to keep some of its forums confidential. Consider, for example, a forum in which the vendor wishes to explore customer perceptions of a current product or needs for new capabilities. It may form invitation-only communities around a specific industry, such as banking, to which it will invite selected banks and industry-focused partners to identify needs, define specifications and provide feedback on proposed offerings.

 

My next blog will look at the benefits delivered by community-building activities and the implications for other IT vendors.

Posted in 21st Century Careers, Business Trends, Community/Other Colleges, Creating the 21st Century Workforce, Education System and Institutions, IT Company Strategies, IT Industry and Companies, IT Industry Role in Education, IT Industry's Role, Job and Career Opportunities, Other Schools, SAP, Skills Requirements, STEM Careers, Technology's Impact on Job Skills, Universities and Grad Schools, Workforce Trends | No Responses »
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