I retired from personal blogging in July 2008.
But you can find me over at http://blog.xero.com.
Some good news yesterday. Xero was selected to represent New Zealand at an event in Wales next month called the Technium Challenge.
The Welsh Development Agency put on the event to encourage inward investment. We’re quite aligned with this program as ours is a very regional strategy.
It’s good validation for us for the UK market. Release from the International Business Wales organisation below.
Haven’t been to Wales before, so that’s exciting.
blog
Congratulations Rod and the team, great vindication of the work on Xero
Now you HAVE to come and say hello if you are coming to Wales…
What are the dates? Wales isn’t that far from Munich. ;)
Congratulations Rod - we entered TripShare too as we thought the year in the Technium would be a great platform for entry into the UK market, and the support for an emerging company they’re offering is fantastic. I’ve visited the Techniums and they’re an awesome resource. Best of luck on the ‘Learning Journey’ next month.
Hi Rod, we haven’t met but I enjoy your blog. Saw this article today in Business Week and thought it may be useful:
April 20, 2007, 9:45PM EST
SAP’s New Target: Small Biz
The software maker is launching a new product designed to meet the needs of small to midsize businesses. Will it be able to retain its large customers, too?
by Aaron Ricadela
SAP’s first-quarter earnings on Apr. 20 calmed skittish investors—mainly by avoiding any more bad news. Now, the German software company hopes to ride the tailwind into its biggest customer conference of the year, where it will present a new plan for growth: helping smaller companies get more organized and bigger ones move faster—attributes not traditionally associated with stolid SAP.
The company plans to pour as much as $520 million into launching several new products, so investors and customers are hanging on every shred of information.
At its Sapphire conference in Atlanta, which runs Apr. 22–25, SAP will detail a delivery schedule for A1S, new software to help small and midsize companies manage operations, accounting, and sales. Some companies will be able to start using the products this year, and the software will be generally available starting in early 2008. SAP also will announce a software package aimed at helping big companies move faster when they merge, introduce products, or sign partnership deals—a reflection of companies’ desire to use technology to set themselves apart from competitors, SAP Chief Executive Henning Kagermann said in an interview. “You see the impatience CEOs have these days. People don’t want a bunch of different systems.”
What a Relief It Is
The moves come at a critical juncture for SAP (SAP). First-quarter sales rose 9%, to $2.07 billion, and earnings were up 10%, to $421.6 million (see BusinessWeek.com, 4/20/07, “SAP Gives Doubters Soothing News”). Those numbers didn’t surpass analysts’ expectations, but after a string of bad news including weak fourth-quarter sales, the Mar. 28 departure of key executive Shai Agassi, and a corporate espionage lawsuit filed by archrival Oracle, the results didn’t have to. “They needed to stop the bleeding,” says Peter Kuper, a vice-president and research associate at Morgan Stanley (MS). “Investors feel relieved that the worst is over, perhaps.”
Shares of SAP closed $1.21 higher Apr. 20, to $50.39. Among the first-quarter bright spots: New license sales rose 10%, rebounding sequentially from disappointing fourth-quarter growth. License sales are a key indicator of future revenue from consulting services and technical support. SAP also reported 12% revenue growth in the U.S., Canada, and Central and South America, just days after tech-industry bellwether IBM (IBM) reported sluggish U.S. sales in March (see BusinessWeek.com, 4/18/07, “No Touchdowns for Tech Bellwethers”). Kagermann says the companies are in “different phases,” with demand for applications software stronger than for technical services, IBM’s stock in trade.
Targeting New Markets
The biggest maker of corporate applications for accounting, inventory, orders, and manufacturing schedules, SAP is locked in a fierce battle for market share with Oracle (ORCL). Microsoft (MSFT) also is expanding its presence in the market. To keep growing, SAP needs to prove that it can sell new products tailored to small and midsize companies and serve customers in China, India, and Brazil that historically haven’t bought its software. U.S. sales of business applications to firms with $250 million to $1 billion in annual revenues will grow 10% between 2005 and 2010, vs. 5% growth in sales of software to large companies, according to industry consultancy AMR Research. AMR pegs applications sales growth at 14% in Asia and 15% in Latin America—twice as fast as in the U.S. and Europe.
Trouble is, SAP’s sales machine has been tuned to serve large accounts, and it lacks the network of dealers that specialty software makers use to reach smaller clients. Making matters trickier, SAP’s twin goals of reaching down to smaller customers and updating its traditional customers are somewhat at odds. “The midmarket is the last mining opportunity for enterprise software companies,” says Kuper. “The problem is once you go downstream, it can lead to pricing pressure at the top end,” as large companies demand discounts to close the gap between what they and smaller users pay.
To help ease the tension, SAP plans to offer A1S in two flavors: as a software package midsize companies can install on their servers and customize to their needs, and as an online software suite that SAP will run on its own computers and deliver over the Internet for small companies with fewer options. The online software could cost half as much as the packaged version of A1S, says Kagermann. “That’s the only way to lower the cost of ownership by factors,” he says.
Challenges Ahead
SAP will have to build new data centers to host the software, and that won’t be cheap. The investment will shave its expected 2007 operating margin by 1% to 2%, to around 27% of sales. That’s slightly lower than in 2006. “You have a lot of costs up front,” says Kagermann. “It’s a different model.” If sales go as forecast, A1S could generate $1.3 billion in revenues by 2010.
At the same time, SAP needs to give established customers new reasons to upgrade. Many of SAP’s core manufacturing customers still run 1990s software called R/3, written in an arcane programming language owned by SAP. The company has been working furiously to convert those shops to newer software, called NetWeaver, that’s based on Java, an initiative spearheaded by Agassi before he left the company (see BusinessWeek.com, 3/29/07, “Agassi’s Departure Realigns SAP”). “That’s a huge and expensive switch to make,” says Bill McSpadden, CEO of PWR Consulting, which advises manufacturing companies on technology. “They were banking on him.”
What’s more, many customers are struggling to extract a simple, unified view of their business data from SAP systems, which can run on computers scattered around the world. Rod Masney, president of the Americas’ SAP Users’ Group and global IT director at packaging maker Owens-Illinois (OI), says he plans to raise the issue in meetings with Kagermann and other SAP executives in Atlanta. Sharing key information with customers “can be differentiating, lock a customer in, and help drive top-line revenue,” he says. But “companies with global operations may have different versions of the [information].”
Satifying Customers and Investors
At the conference in Atlanta, SAP plans to unveil new software that may make customers like Masney happy: a single program that can track performance, hedge against risks, and comply with government regulations from within a single application. SAP and Cisco Systems (CSCO) will also deliver a jointly developed server preloaded with software for preventing computer security breaches and privacy violations.
SAP’s results may have soothed investor angst—for the moment. Now it will need to prove it can manage two big product transitions without stumbling further. And the company’s mum on what comes next, as it tries to keep customers focused on its NetWeaver technology. “There is no next,” says Kagermann. “This is an architecture that’s here to stay.” For SAP to keep meeting expectations, it will need to show that its best customers also are here to stay.
Ricadela is a writer for BusinessWeek.com in Silicon Valley.
KBM quoted: The biggest maker of corporate applications for accounting, inventory, orders, and manufacturing schedules, SAP is locked in a fierce battle for market share with Oracle (ORCL).
I’ve never used SAP application before but I am pretty much sure that they do use OR (Operations Research) algorithms for scheduling, budget planning, costing acitivities opmimizatons, etc,… My assumption that SAP is using OR is based on their name being listed on ILOG’s website as business partners:
http://www.ilog.com/partners/directory/software.cfm
ILOG has a popular Optimizations & OR industrial strength commercial API call CPLEX in different computer languages. OR algorithms is popular in application for business decision management. Air New Zealand is using OR software for its staff scheduling and other financial decision making. OR is widely adopted in Supply Chain Management software and Transportation Logistics where there is no surprise there that SAP is into OR, since their software is tailored to this market.
One Auckland software house Optima Corporation do use OR in their product development. There are both commercial & open sources OR APIs available out there for developers.
I am not sure whether accountants do frequently use OR software for budget allocation, but I am sure that some who are familiar with OR do use it. Some examples found on the internet are:
#1) Linear Programming for Accountants
#2)2 Parts
——-
a)A Mathematical Model of the Capital Allocation Problem
b)Methods for Solving the Capital Allocation Problem