How hybris gives SAP a reverse mullet: party in the front, all-business in the back
“Customer experience” is the new catch phrase for the modern enterprise, from the CIO to the CMO to the CEO, and a few bubbly, parody-worthy titles in between – head of consumer experience, chief digital officer... (Is there a chief analog officer counterpart?) Soon nearly every technology provider will be rethinking (read: repackaging) products around the theme. I mean, hasn’t anti-virus software always created a better customer experience?
But one place where the term fits like a signed Johnny Manziel helmet is ecommerce, a customer experience that so clearly affects the bottom line.
SAP is suddenly in the game with its recent purchase of hybris, a master data management software maker, which became official yesterday. The lower-case "h" is on purpose, as if it were to be rhymed with, say, hubris in an ee cummings poem: “open thy fire! for i have had some bliss; sap just acquired hybris.” More to the point, the hybris-fueled SAP is now ready to compete with long-time ecommerce leaders like IBM and Oracle, and that means things could really heat up.
The last time ecommerce was the "in" thing was during the rise of eBay in the mid 1990s. The 2013 version of ecommerce is perhaps more tepid than that, and thrives without the Pez dispensers and Beanie Babies. Today's ecommerce has warmed because the platforms that run it are capable of creating the ultimate customer touch point, connecting buyer and seller like star-crossed lovers, especially when properly integrated with all of those mature, enterprise-class back-end systems like CRM and ERP, and even newer initiatives like social and big data.
To fully butcher the 90's comparison, today's ecommerce is the reverse mullet: party in the front, all-business in the back.
It theoretically removes the "e," melding customer interactions across multiple channels, including point-of-sale in physical stores, social media destinations, the Web, and mobile, and creating a value chain that weaves together search and discovery, ordering and tracking, personalization and geo-location, delivery and return. Commerce offerings are incredibly complex, handling everything from shopping carts to taxation, product catalog creation and management, settlement, merchandising across channels, inventory management and so on.
The enterprise ecommerce party starting reaching a higher pitch during the past year, as NetSuite defibrillated its cloud-based offering, SuiteCommerce, and then acquired Retail Anywhere (January) and OrderMotion (May). SAP's ecommerce offering required running the company's ERP software or CRM system, and has been through what Forrester analyst Peter Sheldon called "repeated false starts." SAP acquired Ariba last May (for $4.3 billion), and hybris in June (deal terms were undisclosed).
NetSuite CEO Zach Nelson spent an inordinate amount of time discussing his SuiteCommerce offering during the company’s last earnings call; he also took a few swipes at the SAP acquisition of hybris, saying, essentially, that SAP is where good technology often goes to die (specifically he said: “as they swallow these acquisitions, they don't tend to do much with them”). Nelson says that his company is “the only one with a [cloud-based] common platform for mobile, e-commerce and point-of-sale.”
Meanwhile SAP held a press and analyst event yesterday, where the company discussed how it wouldn't let hybris get lost inside SAP, and in fact how the company was putting all of its commerce eggs into this new hybris basket. When asked how SAP would manage conflict between the hybris offerings and SAP's existing commerce products, SAP CMO Jonathan Becher said, simply, "The go forward solution is hybris."
Given that hybris was the only company in Gartner's ecommerce magic quadrant besides market leaders Oracle and IBM, in a sector that Gartner sizes at roughly $30 billion or more, suddenly it seems SAP just bought its way into the game. Hybris apparently had other suitors and was also considering an IPO, options the company's CEO Ariel Luedi alluded to on Tuesday. Gartner estimates hybris grew by 90 percent in 2011 and 2012.
The hybris customer list is serious. It includes, for example, Procter & Gamble, Nespresso, Nikon and many other household names. Grainger, a manufacturer of industrial supplies, conducts 25 percent of its business on hybris, more than $2 billion of commerce, and manages 500,000 orders per day. Most of the customers hybris discussed on Tuesday were similarly sophisticated and demanding.
hybris CEO Luedi is an old hand in the software industry, serving stints at IBM, Oracle, and Salesforce.com, and he talks like a typically veteran software guru, or how Yoda would talk if he were employed by IBM. Take this thought-provoking gem: "Retailers say they want single view of customer; that's the inside out approach. You have to think of the customer having single view of a brand, or of a retailer. That's today, and that's what's different." For Leudi, that’s the definition of the ideal customer experience, one in which the customer is truly at the center, one in which the buyer gains control.
SAP would be wise to hold on tightly to Luedi, especially after the recent losses of Sanjay Poonen, who headed up the company’s mobile division (he is now at VMWare), and Lars Dalgaard, who was in charge of SAP’s cloud strategy (he remains an advisor to SAP, according to co-CEO Bill McDermott, but he is also now a partner at Andreesen Horowitz). Dalgaard came to SAP via the SuccessFactors acquisition.
Luedi admits that the hybris solution is a generation or two younger than IBM's or Oracle's but insists that it is therefore built with more flexibility in mind. He points to hybris customer Nikon, which creates a new commerce deployment every two days, inferring that competitors lack the agility to support such dynamic business models.
hybris only recently upgraded its technology to allow it to run as a multi-tenant cloud application. Luedi confesses that while he wasn’t opposed to the cloud (after all, he ran Europe for Salesforce.com), he just “needed the big fat checks for on premises licenses.” (Wait, was that candor? That will never do at the big kids table!) But he adds that customer-facing business processes are more difficult than internal ones, and that the cloud is not always an applicable solution for all customers. Hybris can now run in a hybrid fashion (with some parts in the cloud and some on premises).
SAP seems to be moving fast to take advantage of the hybris technology, although company officials were quick to point out that only about 30 percent of hybris customers run SAP software, and the technology would remain independent of SAP ERP and CRM systems. Still, SAP will try to exploit that 70 percent opportunity.
And in keeping with SAP’s all-out push to champion its in-memory database architecture, the hybris software runs on Hana. Luedi calls hybris-on-Hana game changing, and provides the example of Grainger, with its one million products, and with each Grainger customer negotiating new pricing on a per-transaction basis, resulting in trillions of price rows in the database. Keeping track of price history on a per customer basis, and being able to reflect that in real time, Luedi says, can only be done effectively on technology like Hana.
SAP CMO Becher points to an MIT study, which found that leads acted on in less than five minutes are 22 times more likely to close than those acted on past 30 minutes. Becher also says that when commerce sites begin to offer real-time personalization, where new web sites get built automatically and instantly for each consumer, the vision for what’s possible changes dramatically; again, the implication here is that only Hana can provide that capability.
SAP officials say hybris is also complementary to Ariba. Luedi puts it simply: Ariba makes the processes of procurement more efficient; hybris does the same for the sell side. Becher adds that there will be natural connection points between Ariba and hybris.
As the conference reached a close, an audience member asked if the hybris acquisition completed the picture for SAP. Becher indicated that SAP would stand pat on the customer experience part, with hybris as the linchpin, but that there will be more activity around the area of marketing resource management (automating and optimizing the business processes of marketing), a category that includes companies like IBM, Teradata and SAS.
In other words, SAP’s not done shopping.