This blog post is as more an open question than a pronouncement. So please feel free to comment on this or take the idea in a different direction.

I’ve been thinking about the next generation of Enterprise Applications, the value that they (might) bring, and about how people might justify replacing the enterprise applications they have with the new generation.

Generally speaking, you justify an investment in infrastructure using ROI. You invest this much, get this much return. For the first generation of enterprise applications (most everything designed between 1990 and 2003 or later), this made sense, because they were basically automation apps. They automated work done by people. The ROI showed up because you didn’t have to pay people to do it any more.

Now these new applications simply don’t do that, that is, they don’t automate appreciably better than the old applications do. And this means that ROI is a pretty crummy tool for evaluating whether an investment is worthwhile. Yes, there will be ROI if the enterprise application works the way it’s supposed to. But the return will be highly indirect. You won’t be able to fire people and pay for the application.

Brian Sommer has been talking about this problem for years–essentially, he points out that automating something that’s already automated doesn’t justify an investment on the same scale. But he has never really explored whether there are other forms of justification.

Nenshad argues in his book and his blog that good performance management enabled by modern tools will get you to a place you want to be, and he tells you a lot about how to do it. And while it is true that these new applications help you manage performance better and that’s one of the reasons you want them, he doesn’t offer a way of thinking about justifying the move to what he recommends. (Nenshad, if I missed this in your book, I’m sorry.)

So what does one use? Well, let me offer a concept and sketch it out in a paragraph or two, and you my small but apparently very loyal readership can then take me to task.

I’ll argue that what these new applications really do is improve “operational effectiveness.” What’s that? Well, to start out with, let’s just say that they let each employee put more effort into moving the company forward and less effort on overcoming friction, that is.

Well, that’s suitably hazy. So here are some things that you could measure that would, I think, be indicators that employee effort is more coherent and focused. You could, for instance, take a page from the black belts and measure operational errors or even just exceptions as part of operational effectiveness. Or, you could look at corporate processes that are nominally automated and see whether they are managed by exception. (Truly best, automatable practices should require almost no routine manual actions.)

People sometimes try to look at operational effectiveness by measuring what percentage of revenue is spent on things that feel like pure expense, like IT. So, a company that spends 3% of its revenues is less effective than one that spends 1% of its revenues. People also try to get at it by trying to look at which activities are “value-added” and trying to get people to do more of them. Both ideas are silly, of course, in themselves. (The 3% company may be spending on stuff that makes them effective, while the 1% isn’t.) But I think there might be indicators of operational effectiveness that are better. Wouldn’t operationally effective companies spend less time in meetings, send fewer junk e-mails, work fewer hours/employee (!), resolve more customer complaints and deflect fewer, etc., etc., etc.?

You get the idea, I think. So why is this a good measure for the new generation of applications? Because, bottom line, I think that’s what they’ll do. They’ll help organizations and people avoid wheel-spinning, error correction, and pointless processes or rules by getting to what matters, faster.

Of course, people have always accused me of being a ridiculous, blue-sky, naive optimist. But that’s how it seems to me.

What do you think?

Advertisements

Lawson’s New Office

April 22, 2009

If you read this blog at all, you know that I hammer over and over again at a single theme: the middle-aged application. What is a middle-aged application? It’s one whose basic mode of interacting with data was invented almost 20 years ago. It stores data in tables; you interact with it by pushing data into those tables or taking the data out. It was a great model, 20 years ago. Today, in my view, it’s fading.

What do you do if you’re a vendor, and you have an app that was built on a paradigm invented 20 years ago? Well, one thing you can try is a new interface. That way, even though you’re still basically storing data in tables, you’re doing it in a way that’s brighter, more colorful, and possibly more useful.

Unfortunately, this is kind of an obvious idea, and the landscape of ERP systems is littered with “new” interfaces that turned out to be not so new after all. According to the vendor, every single one of these modernized the application completely. But all they really did was put lipstick on a pig–and not much lipstick on an exceptionally hairy pig.

The latest such attempt (and surely one of the most creditable) is an interface demo’ed by Lawson at its recent CUE conference. I got a chance to take a look at it (if not a look into it), and I would have liked nothing more than to say that it changes something important about the application.

Unfortunately, that’s not possible, but not for the reason you’d expect. It isn’t that I looked at it and saw, “Oh, it’s just like all the others.” It’s that Lawson made it impossible for me to tell one way or the other. This is not a good thing, of course; if Lawson really has something great, they should show it to people. But it does say something important about the software industry.

First, let me tell you what I know. Lawson told us at the conference that they’re offering two new things that might change the way users work with the application. The first is a search function, which allows you to search for records via their contents, rather than getting at them through the menu system. The idea of this is really good; if you had to name just one thing that makes the old ERP apps middle-aged, it’s the fact that you can’t Google through them in any way, shape, or form. The second is something called Smart Office, which puts a Microsoft Office-like skin on Lawson and lets you interact with Lawson through Microsoft Office products, like Excel and Outlook.

The search function is particularly exciting, because the problems with search are built into the way 20-year-old ERP systems work. ERP systems store their records in a database; to get the records out, you have to use the tools the database provides. Search isn’t one of those tools. (It is too slow.) Lawson gets around this problem by manages pushing all the records in the database out to an appliance, a separate virtual machine, and then using a tool that wouldn’t work on a database, the open source search-engine, Lucene.

From what I could tell, there are some really thoughtful things in the way they’ve implemented the search. Particularly impressive was the fact that you can search back on all the work you’ve done, which makes it easier for you to stop in the middle now, go back to something when somebody asks you about it, or correct mistakes.

Smart Office, alas, seems to be a little more ho-hum. Some of what SmartOffice does was actually built into PeopleSoft more than 10 years ago; much also looks like a knock-off of Duet, the much-vaunted SAP attempt to integrate with Microsoft Office. Still, when you take a quick look at it, it doesn’t seem too bad.

If either product had been introduced ten years ago, I think I would have left my reporting at that. Lawson had come up with something new in the interface and demo’ed it. It wasn’t really very clear exactly what. But who cares. One needed to give them the benefit of the doubt. Surely it was better than a green screen.

Ten years later, though, I don’t think that’s right (even though that’s what most of the analysts did). Ten years later, there’s been a lot of experience with “major” interface improvements, and, as I said above, it’s been a disappointing experience. Most of these improvements have been at best, an injection of Botox, doing nothing about the basic problems with an aging interface, and possibly making things worse.

What this means for Lawson is that the burden of proof has changed. If they’re going to come up with a change in the way users get at data and claim that it’s a compelling, potentially transformative difference, they’re going to have to prove it, some way or another.

Certainly, if the language of the demos is any guide, Lawson does think that they have a compelling and transformative innovation. To listen to Dean Hager, their inimitable and endlessly enthusiastic spokesman for the product, Smart Office and Enterprise Search are, at the very least, what people were offered in the movie, “Seconds,” a brand new body and hence a second life.

So did they prove it? Nope. Yes, there were a few things in the demo which were encouraging. Some of the examples of how to use Search, for instance, were pretty insightful. And while the SmartOffice demo couldn’t be made out by those of us watching on the web, some of the claims sounded good, and the customers who were video’ed were enthusiastic.

But there were also a few things that were discouraging. Since I couldn’t actually see the demos (Lawson doesn’t invite me to their user conferences, even though I don’t ask them to pay my way), I can’t point to anything concrete. But I can say that I found the fact that Smart Office is a client technology (not a thin browser technology) provided by Microsoft less than heartening. (Anybody who doesn’t understand why that’s a problem should take about a ten-second look at a phone that runs Windows Mobile, then take a 10-second look at an iPhone.) Also not so heartening was the fact that Lawson’s broadcast of the event for “remote analysts,” that is, people they don’t think are very important, was incredibly web unsavvy. (Unless you use Microsoft products, you basically can’t even get a feed.)

Add up the discouraging and encouraging, though, and do you get proof? Certainly not. Both the positives and the negatives are way too vague.

And that’s precisely the trouble. It’s 2009. People have been working on these products for 20 years. There’s a great deal known about them. And today, there’s a presumption, born of bitter history, that when a vendor announces something fabulous, but most of what the vendor says is hand-waving, that what they’ve got isn’t really that fabulous.

So what would it take for me (or any rational person) to be convinced that the latest Lawson innovation is one that matters?

Well, let me tell you, it’s not easy. Even if I had full access to this application, something that there’s not a snowball’s proverbial chance that Lawson would give me, it would probably take me a day or two–I’m not kidding–to figure out how much of an improvement it is. To see why this is, let’s just take search as an example.

Lawson says they’ve made search of an application’s records as easy as Google search and that they’ve done this, as I said above, by putting the records on a separate appliance and using an open-source search engine. Certainly, doing this solves the problem of speed, which has been a serious problem.

But the trouble is that solving the speed problem does not make the record search as easy as Google. To make it as easy as Google, there are a lot of other problems you have to solve, too.

Here are some examples. You need some way of ranking what is sent to you in a way that makes sense for your uses; otherwise, as with Google, you’ll get tens of thousands of records when you make a search, and you’ll have to page through them. And you need to solve the ontology problem, the fact that you want to include synonyms in what you found, as well as exact matches. (Sometimes, these “synonyms” are nothing more than making sure that IBM, I.B.M., and International Business Machines are all included in the search results.) You need some way to use metadata descriptions. (Can you easily–and I mean easily, easily–restrict the search to sensible populations, like AR records, or sales orders from two years ago.) And above all, you need to deal with the problem of bad data. Many of the records you’ll grab in any search are records that shouldn’t be in the system. You need some way of filtering them out.

(Enterprise applications that have been in use for any time at all have this big, smelly layer of refuse in them, just the way lakes do. On the whole, I think, the bottoms of lakes smell better. Unless carefully managed, search has a way of stirring up all that stuff on the bottom, not something you want to do.)

If an enterprise application search product doesn’t deal with those problems, well, it isn’t much good. You can say it’s as easy as Google. But when the customer uses it, they just won’t have that experience.

There are still other problems, and one of them’s a real biggie: it’s what I call the transition problem.

You see, if the search (or Smart Office) is really going to change the way people interact with this 20-year-old app, people have to use it. So, in addition to providing a brand-new very hot, ultra-cool search capability (or Smart Office capability), Lawson has to make it possible for its existing customer base to take this capability up and take it up in a way that prevents the costs from overwhelming the benefits.

This transition problem is a thorny one for all the providers of middle-aged enterprise apps; I’ve seen versions of it at SAP, Oracle, and Infor, as well as Lawson. The provider figures out some way of getting an app to sit up and sing, “Rule Brittania,” as the old phrase goes. But then they tell the users that they’ll have to go through a massive upgrade and retrain all their users in order to make the trick happen. Then they’re surprised when most users opt to dispense with any stirring displays of patriotism.

To prove that Enterprise Search or Smart Office actually does something important, it seems to me that Lawson has to tell people (you, me, the customer, etc.) in a clear, simple way just exactly what it has done to deal with all these problems, and then it needs to provide us (you, me, the customer) with enough access so that we can genuinely see for ourselves.

Has Lawson done that? Well no, of course it hasn’t. I’m sure the thought of doing something like that never even entered Dean Hager’s head.

Not only is this unfortunate, it also says something important about the enterprise application industry and about the ability of Lawson (or any of the other middle-aged app companies) to modernize. The fact that Lawson (or SAP or Oracle or any other apps company that does this) doesn’t even realize that the burden of proof is now on them shows how far behind they really are. In a way, it’s puzzling. In the era of the iPhone and FaceBook and the collapse of GM, shouldn’t any company like Lawson be worried? But the answer seems to be, “No.”

Why don’t they think so? I”m not sure. What it comes down to, I guess, is that middle-aged apps and middle-aged apps companies are a lot like middle-aged people; it seems obvious to them that they’re still young, and so they don’t realize it when people start laughing at them. They think that they can give a cute demo at a user conference, have a lot of salespeople go out and tell their customers that it’s the latest, greatest thing, and then the IT staff will put it into the plans. That’s how it was ten years ago, and that’s how it is today. After all, the customers are paying maintenance, and Lawson is taking the maintenance money and working on things that keep the product up to date. What more is wanted?

Well, what is wanted is evidence. Without that evidence, the presumption has to be that applications like Salesforce (enterprise search three or four years ago) or Workday, which uses Flash, not Microsoft, and doesn’t use a 4GL, are now carrying the innovation banner.

Of course, the middle-aged apps vendors are unconvinced, just as all middle-aged employees are. We have the experience, they say; we have the know-how; we have the functionality; see, we can still dance a jig.

They say it, but in my view, they are wrong. Viewed by anybody who uses an iPhone every day, these apps just don’t work all that well any more, relative to how much they cost. They badly need to be brought up to speed. Ten years ago, we could assume that the companies were trying to keep up and we could accept mere assurance. But ten years later, that is no longer enough.

Yes, it may take the customers longer to figure this out than it does the analysts. But eventually, even the most ardent fan realizes that Elizabeth Taylor weighs a little more than she used to.

This is the first in a series on $AP* and the basic $AP* value proposition.

Or lack thereof.

The series is called, “Don’t Buy $AP,” because my thesis is that the value proposition just isn’t very compelling for new buyers.

This isn’t a new idea with me. I’ve felt for a long time that it’s hard to get your money’s worth from back-office apps.  I’ve also felt that the claims the vendors made about the value of their products were, shall we say, optimistic.

But in an apps environment where almost everybody (IT, the vendors, the pundits) is pretty committed to believing in the value, I’ve chosen to ignore these feelings.

No more. I don’t owe the enterprise vendors anything, and I would like to help people buy smarter, so I’m going to try to figure out, in this series, whether there’s anything to these intuitions.  If I dig down a little bit, maybe it will help customers buy smarter.  And who knows, maybe I can get some intelligent reactions that will show me where I’ve gone wrong.

I can’t cover everything at once. So let me start with something that really puzzles me.

We all know that prices for a technology ought to go down as the technology gets older.  But that doesn’t seem to be true with enterprise apps. SAP* has entered middle age, yet the prices for SAP* have stayed steady or gone up.

Think about it.  The core, Unix-based SAP product on an open-systems platform that ran financials and kept track of inventory was developed around 1990, and the product pretty much stabilized at Version 4.6, in the late 1990s.  The price then was about $2500-$3000/user with 17% maintenance, if I remember correctly, and today, it’s about $2500-$3000/user with 22% maintenance.

That doesn’t seem right to me.  You see, part of the value of a complex product lies in one’s estimate of the useful life of the product.  You pay more for a Mercedes partly because you know it will last longer and retain its resale value.  So if you were buying SAP back in 1995, let’s say, you were buying a 5-year-old product with a fairly long useful life ahead of it.  At the time, let’s say, people thought the average useful life of an ERP system was 7 years, but with SAP, you figured that there’d be a longer useful life and that would partially justify the premium price. So surely some percentage of what you paid was for that particular value.

Let’s say, for instance, that you were progressive beyond the norm and you thought the technology developed in 1990 would last another 20 years.  It’s now 2009.  You got a good deal. You’ve reached the twenty year mark, and the technology still works reasonably well.

Fine. But now, let’s say you’re in a different situation. You didn’t buy SAP* back then; you bought another system or you muddled along, or you just acquired a company, or whatever, and today, you’re looking at SAP.  You surely wouldn’t want to pay roughly the same amount you paid back when the system was newer.

To see the point, let me pursue the analogy.  Let’s say you want a new car, and somebody offered you an absolutely brand-new 1990 Mercedes. Never been driven; no wear and tear whatsoever. You wouldn’t want to pay the 2009 price for it. Sure, it’s a nice car, and sure it works pretty well.  But there’s just a whole lot of stuff that has changed in the car world since then, and in the next 15 years, there will be a whole lot more.  So, good as it is, that 1990 car isn’t worth what it was when it was new.

$AP* PR, before you start calling me, I know, I know, I know, I know.  You think that the product has improved steadily and linearly in the last 14 years. So you don’t think the analogy holds. You think you’re offering the customer a product that now has 14 years of improvements in it, so that customers are actually getting a big bargain, a much better product at the same price. You think they’re getting the 2009 Mercedes.

Well, I don’t think so.  I think that when you sit yourself down behind that nice, leather SAP* steering wheel and start that nice, purring motor, you can see immediately that what you have just isn’t all that new. But I’ve already tried your patience long enough. To see why I think so, you and I will have to wait for the next post.

* Or Oracle or any other back-office app designed twenty years ago.