Even though the timing of Apotheker’s departure is a little unusual I can not say I am surprised by it.  If I look over the landscape of a CEO’s job responsibilities (sales, strategy, etc.) and compare that to Leo’s short tenure I don’t see any direction coming from the top.  Leo Apotheker came in at a difficult time, but even in the midst of a global economic downturn it is still possible to succeed.

Setting aside some of SAP’s maintenance fee mis-steps there just hasn’t been a compelling forward-looking vision for SAP.  SAP has done little to inspire the marketplace, and the introduction of alternative maintenance players like Rimini Street means that SAP MUST innovate and create a compelling message.  And even if some argue that SAP has provided some compelling message, I’m an SAP insider, working on SAP projects since 1994 and *I* don’t know what that message is.

To that end, I even penned a plea to SAP calling for innovation and market leadership.  That posting, entitled “Opportunities for INNOVATION SAP, HELLO?” [FN1] laid out some clear, but relatively simple application changes to the ERP flagship product from SAP.  Although well received by a number of SAP insiders it is doubtful that those in key decision making roles will adopt much, or even any of the application improvement ideas.

Where SAP is Missing a Key Business and Market Opportunity for Leadership

In reading through a post on the CIO Magazine blogs (“ERP Costs: 3 Signs Companies Are Wasting Less Money” [FN2]) on Panorama’s comparison of Saas with tranditional ERP it would appear that Saas is not all it is cracked up to be.  SAP has completely missed the boat here on not capitalizing on the GENUINE shortcomings of Saas ERP compared to on-premise ERP solutions like SAP.

Saas ERP is implemented over 35% quicker (11.6 mo v. 18.4), but cost only 10% less to implement (6.2 v. 6.9 ann. rev), and even though CEOs may be slightly more satisfied (< 3% difference, may be margin of error?), business is more disappointed (23.5 sat v. 42.9) and Saas is more often over budget (70.6% vs. 59%).  If this were a head to head comparison by the SAME measures on premise ERP applications have been measured by this would be considered an utter failure and an unmitigated disaster.  But the technology trade publications tend to be eerily silent on this.  Where is SAP’s market leadership in pointing this out?  And on top of that, what about the security issues involved as well?

• It is implemented over 35% faster but only costs 10% less?
• CEO satisfaction difference is marginal so that unless the sampling size is massive (which is doubtful) it falls within a margin of error.
• Businesses are about HALF as satisfied with Saas solutions as they are with on-premise solutions?
• Saas blows the budget about 17% – 20% MORE often than on-premise ERP?  (The % difference between 59% and 70.6% as a proportion of the 59% on-premise budget score).
• Off site (off premise) access and security troubles plague Saas and “Cloud computing” models.
• Another layer and level of contracts and service level agreements which must be correctly navigated.

When you look at the facts and strip away the hype on-premise ERP solutions win hands down.  Even with the on-premise ERP results, by comparison to Saas they look wonderful.

And SAP has done nothing to address this in the marketplace.  SAP has also done little to really address the usability of their software other than to provide a technical toolkit (GUI XT) to allow customers to create their own front ends.  MUCH more could be done. 

SAP could today “apple-ize” their user interface and end user experience to be more intuitive and more responsive to end users.  I’m not referring to an IPod, or IPad touch interface, but more of an intuitive look and feel that would make a user’s daily tasks simpler and less confusing.

What Does the Future of SAP Look Like?

• SAP will need to define and articulate to the marketplace a clearer message about its value proposition and its differences. 
• SAP should focus on end-user experience and a more intuitive user interface to help reduce the change management, adoption, and transition pain.
• SAP should refocus its application landscape messages, its sales messages, and its strengths on business solutions rather than package solutions.[FN3]  Too much time and attention is spent on application features by the SAP literature and sales force and not enough on what those features mean to business.
• SAP MUST develop an internal reference database of EVERY consultant who has ever taken a course, or been certified with them.  For far too long the company has allowed fakes, frauds, and cons to lie about certifications or training and SAP has not provided any way to verify these claims.  It is long past time for SAP to provide a “transcript” of courses and certifications for end-customer use when a potential employee or contractor comes to them.

These and many other straight forward solutions would help to generate marketplace buzz about SAP’s enterprise application suite and provide customers reasons for a purchase or upgrade.

[FN1]  http://www.r3now.com/opportunities-for-innovation-sap-hello

[FN2]  http://www.cio.com/article/531863/ERP_Costs_3_Signs_Companies_Are_Wasting_Less_Money

[FN3]  Over the years I have heard so many SAP sales reps and sales presentations that focus on this SAP application or that SAP application rather than addressing a business need or actual business requirements.  This is a classic sales No, No.  All these sales people do is describe features rather than explaining to the business what these features mean to the business in terms of benefit.  For way too long many in the SAP sales force have relied on the SAP name.

The CIO role in business has been changing almost as fast as technology itself for the last decade.  In the past it was enough to focus on business processes and automation.  It was enough to satisfy the business needs for operational excellence.  By doing this successfully the CIO was given carte blanche, often times large budgets and significant latitude in how best to apply technology budgets.  Those days are quickly fading and today many IT departments and IT organizations are becoming internal vendors to internal customers with “charge backs” to the internal organizations.  They are becoming little more than an internal cost center and “overhead” to the rest of the business.  And this re-alignment of the technology organization is creating significant budget pressures leading to staffing gaps.

Together with these pressures, the CIO and IT decision maker is being pressed to deliver more with less.  More than ever before there is pressure for all levels of IT decision makers to deliver business results–, those results that are focused on customer acquisition, customer retention, revenue growth, and innovation.  What this means is that the CIO or key IT decision maker must focus on being a bridge to the different sides of the business like never before.  The CIO who is able to properly partner with, and integrate into the business as a whole will rise above their peers and be successful.  Those who can not will find budgeting and staffing more and more difficult. 

Today’s CIO has a big job, as this Booz Allen insight article from 2002 [FN1] noted, to succeed they must:

• participate in corporate planning and strategy sessions,
• align and integrate technology initiatives in terms the business understands — speeding products to market, enabling growth, and reading costs and risks, etc.,
• make the case for technology spend and budgets, in business terms, with competing C-level executives,
• develop internal knowledge and collaboration networks.

There are answers, and there are solutions to the CIO quandary about business and IT integration, however, before getting to the heart of the matter let’s take a look at the different roles each position traditionally plays in the enterprise.

CFO (and COO) Alignment is Correctly Focused on Lagging Business Indicators

Intuitively and structurally the CFO role is focused on company finances and company health.  This would be a company’s lagging indicators in terms of business metrics where both operations and finance intersect.  If the company as a whole is doing well then these lagging indicators will show that after the entire process is complete and customer cash is collected and vendor bills are paid together with employee salaries, fixed expenses, variable expenses, etc., etc., etc.  They are lagging indicators, after the entire process is complete, of whether or not the business is healthy and headed in the right direction.  But these lagging indicators are not the best focus.  If you wait until you have ALREADY ARRIVED at your destination to figure out if you took the right path you may not be in business very long. 

To survive in today’s global economy a business must know early on where to make course corrections to stay on track.  Business no longer has the luxury of waiting until the financial results are in to figure out if things are headed in the right direction.

CEO Alignment is Focused on Strategy, Business Growth, Sales, and Marketing

Once again intuitively and structurally the CEO role is focused on future strategy, sales, marketing, and business growth.  This would represent a company’s leading indicators in terms of business metrics.  If the company has:

• New customer prospects in a healthy pipeline
• A steady stream of customers being converted from the pipeline into orders
• A growing backlog while process performance is static or improving
• Existing customers buying more or higher margin products and services

then these leading indicators of future growth and prosperity look good.  These kinds of leading indicators demonstrate future company performance and have been largely lacking from the technology equation.

The CEO, often through the interaction between the sales, marketing, engineering / product development areas also bears the responsibility for new products or services. 

What is the Proper Role of the CIO in the Organization for Business and IT Integration?

Enter the CIO.  In the past, the CIO role has been almost exclusively focused on lagging indicators or process improvements and current business financial health.  They have focused on process improvement, automation, and those items related to a company’s fiscal health and performance.  Few have addressed the leading indicator side of the equation beyond installing CRM applications (mostly as huge and expensive contact management systems). Fewer technology leaders or technology projects have started to address the leading indicator side of the business equation.

In a nutshell, the CIO role, and the IT staff in a properly aligned organization MUST be business-centric first and they must address business events from both a lagging AND leading indicator perspective.  The CIO must become the bridge between the CEO and the CFO.  In other words the successful CIO must find ways to integrate the operational and sales side of the business.  And not just integrate them, but do so in such a way that technology investment and technology spend becomes focused more aggressively on the “demand” side (customer sales and innovation) rather than on the “supply” side (operations, processes, and automation) of the business equation.

This graphic shows not only the proper CFO/COO, CIO, and CEO level alignment, it also illustrates the burden that the most successful CIO and IT decision maker will carry.  Future CIO success with technology in the business will require a more holistic or complete focus on business demand.  The CIO role is becoming larger, and yet more difficult at the same time that the IT organization is under more and more financial and budget scrutiny.  What this means for the CIO, IT Director, or other IT decision makers is that if they do not have an MBA or other formal business training themselves they may wish to look at enhancing their IT departments and IT organizations with true business analysts who also know technology (or can learn technology).

IT organizations and technology budgets that fail to address both sides of the business equation (lagging AND leading indicators) experience:

• significant budget cuts,
• a move into “maintenance mode,”
• their organization support model converted to an internal vendor to internal customers with “charge-backs” for services provided to the organization,
• being closed out of partnership with the business.

As the business as a whole pushes back on what they see as a very expensive IT department they will find their own internal ways around the budget hits from IT.  Internal company departments will avoid budget hits from these “charge-backs” by doing things themselves whether that means manual processes or developing some measure of internal IT autonomy in some of their tech savvy departmental employees.

What Can IT Decision Makers Do to More Aggressively Address Business Needs?

There are a number of approaches that can be taken and a number of requirements that will be needed for a changing job role.

1. Engage the CFO / COO and the CEO in discussions about supporting their business needs.
2. Find ways to actively and directly integrate part of the IT staff into key business departments.  For example, should the Finance, Operations, and Sales departments each have their own dedicated IT staff members?  Or how do you take a limited staff and create a responsibility matrix to maximize business attention on these key departments?
3. Invest in business analysts, those with business degrees or a business focus, who know or can learn the key technologies to support the business.
4. Define and develop a technology strategy execution team consisting of at least one senior level VP or Director from Finance and Operations (appointed by the CFO / COO), Sales, Marketing, and Engineering (appointed by the CEO), and Technology (appointed by the CIO).
5. Have the strategy execution team work together with any of their own key resources to define top level KPIs for IT to business integration.
6. Revisit current KPIs, departmental goals, and metrics to ensure that technology and IT are aligned to these important business measurements.
7. Use the underlying metrics and business goals for the KPIs as the source for both reporting and technology initiatives.

[FN1] Boochever, J., Park, T., Weinberg, J., CEO vs. CIO: Can This Marriage Be Saved? Booz Allen Hamilton, Strategy Business Online, July 17, 2002, retrieved online February 6, 2010 at http://www.strategy-business.com/article/20571

Recently I was reading on article on CIO.com (where I also contribute).  The basic premise of the author was that IT is already integrated with business and all of the hype about business to IT alignment is overblown.  This is not entirely true.  As I commented: