Dan Farber and I spent 90 minutes grilling Scott Lutz, SAP’s VP global SME go-to-market about the company’s A1S plans. At times I gave him a rough ride.
Scott says SAP has undertaken extensive research that indicates there is a significant gap in the market it believes the company can successfully exploit. This gap represents companies that don’t have an end-to-end business solution but which require transparency because they are impacted by a specific event or by imposed requirements.
Examples Scott gave are:
- Companies that have won a major deal with a Wal-Mart and which need to crank up a super efficient operation,
- Acquired private equity portfolio companies where the requirement is improved efficiency or
- Those impacted by regulatory requirements like SOX.
SAP estimates this segment represents as much as 40% of the total 1.2 million businesses employing 50-500 employees which it believes are a good fit for the A1S solution.
In the first scenario, I would counsel companies to exercise extreme care when dealing with companies like Wal-Mart. It has an atrocious record for crushing companies that don’t toe the line. Check out the Rubbermaid story. I’m not convinced that any software can help a company faced with predatory pricing tactics and to suggest otherwise is an oversimplification of business life.
There are other factors to consider. Scott’s example doesn’t take into consideration the fact that companies like IBM and GE already offer tried and tested connectivity to retail giants. Implementing an end to end system without taking these essential external connections into account would be foolhardy. In many cases, it is that connectivity which provides the Wal-Marts with their edge in understanding product price and availability.
SAP will no doubt argue that its experience with companies like Proctor and Gamble gives it the nouse needed to solve these problems. Perhaps. While A1S may be novel, on release, it will be a ‘version 1.0′ and I would be surprised if many companies in this situation will be prepared to bet their business on an as-yet untested solution. Brand alone will not carry SAP.
I can see how the second scenario makes good commercial sense and assuming SAP delivers ‘good enough’ end to end processes then it could be an attractive alternative to the hodge podge of applications that characterise the IT landscape of these kinds of company.
The third scenario is problematic. There is plenty of evidence that SOX regulation in the US has contributed to capital flight to the less regulated UK markets and to a stifling of growth. Why would any company implement software simply to remain in an environment that many already consider has been bad for growing companies?
I will talk to other issues in the next post.
Endnote: For a more comprehensive view of Wal-Mart’s tactics, check out this FastCompany article from 2003.
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