 Special segment today with James Taylor, who is a famous author, blogger, prolific blogger. He tweets a lot. He also is deep involved in the SAP Core apps. James, welcome to, and a friend at El Lone School at Palo Alto. Welcome to the queue. Well, nice to meet you. Okay, welcome. Welcome to our world. Yeah. So, Dave and I... I'm intimidated by these two Macs. Yeah. What's your Twitter handle? Real James. Real James. One, two, three. What is it? J-A-M? E-T. One, two, three. E-T, one, two, three. All right. We're going to have to tweak this out. There you go. The other James Taylor. So, Real James. We'd love to have experts in the queue, but you're one of us. You're out there as an analyst. I mean, an analyst. Yeah. You're basically an analyst. Right. Right. But it's authoritative content. But you're in an area that's really kind of core to the SAP and all its ecosystem. That's the core application suite within SAP. SAP has been modernizing their business over the past four or five years built from the ground up. They've got some nice little facades around things called analytics in memory and haunt. It's actually the big gun for them. They've got their own traditional ERP system. So, where are we with this? Okay. What's window dressing? And what's the real deal? So, break it down for us. So, there's a couple of things. I think one of the things that SAP has clearly been focused on the last few years on the core applications is moving from an environment where really what they did was capture your documents as data and then move them through your process. So, copy from a PO to an invoice and just manage all this data. Just interfaces on the data structure. And trying to say, how do we make these more of a partner in running your business? So, if we've got a claim system, well, how do we make the claim system not just move the claim around, but actually decide if the claim is valid or not? Decide how much we're going to pay on it. How do we tell it how to do that? So, they've been really integrating their business rules technology into their apps. At the same time, you watch the business objects folks come in and push their analytics forward. And now we're at the point where the next big thing is going to be to say, now we've got this real high performance analytics. How do we take what we learn and use it to improve the behavior of the operational systems? We're not quite there yet. That's where the next step needs to come. You start to see it now with Connor and the predictive analytics, but we're not quite closing the loop yet. So, we talked with, we were supposed to have Passo on yesterday, but it turns out he was never actually scheduled. So, we talked to actually met him last night and said, hey, why don't you come on? He didn't have it. But, you know, he's got the four-step plan, right? The step four is ERP, HANA on ERP. And that's kind of massive what step five was. It was a world domination. Essentially, you wanted to have an Apple store or like a store for enterprise. Okay, cool. The step four is ERP with HANA. Where are they with that? You know, they close it all. I mean, what's the update of that step? You know, that I don't know. They're clearly, HANA's been something they've been talking about for a couple of years now. They've clearly got, you know, they went through a phase where it was really about reporting and the sort of soft analytics. And now they've got this new HANA with predictive analytics. They've built a new front-end for it. So, they're really pushing the analytics up that curve. And certainly, if you talk to the groups in the research side, they're thinking in terms of what else could I do with HANA? You know, if I've got the rules for my claims and I want to change them, wouldn't it be nice if I could run the five million claims I processed last year through the new rules and see what's different? Well, that needs HANA, otherwise it takes forever, right? So, that potential is really there with HANA. But I don't think we're still just scratching the surface. What do you see for benchmark with HANA? We're here for people that's two weeks to 30 minutes. Yeah, I mean, there's the same kind of stuff I hear. I mean, what for me is more interesting is not so much the... does it make things I have to do faster? But does it do things that I've never thought about doing fast enough to be worth trying? Yeah, so if I've got... If I get 600,000, I'm working with a client. I've got 600,000 claims a month, I mean, whatever. Huge numbers of claims. Well, if I want to know anything about them, I can't really do anything with that. It's just too much data, right? Once I can start to do things quickly enough to ask a question, get an answer, and go, well, that's interesting. What about this? What if I rerun them and I don't approve that kind of client? Oh, okay, well, it saved me $5 million. Well, maybe I should think about that. Okay, well, yeah, which clients did I piss off by doing that? Well, okay. Maybe it's not such a good idea. Exactly. And so that ability to be really analyzing how you run your business. It's similar, yeah. So, John, you mentioned that HANA journey. It was side by side of bringing it to the business warehouse. Right. HANA specific apps, and then ERP on HANA. But the core applications, right. So, of those steps were furthest away, obviously, from HANA on the core. He even said today, we really can't improve your transaction processing much more than 2 to 3x, which is still good, but it's really hard to do and that's probably a stretch. I mean, they said, I guess the number is 160 million euro, which is, what's that, 250 million? 200 million, some year. Sounds big, I mean, it sounds sizable, meaningful, but you know, you talk to customers and they're like, we're not quite there yet. We did have opera on there, beginning to use it. You know, so they're an early use case. Yeah, I know opera. Yeah, so I mean, everybody is because they're early adopter. Yeah. But they have the kind of problems that HANA is really good at because I think the value in HANA is not going to be from running the current core ERP systems on HANA. Yeah, you can make it a bit faster, but frankly, the ERP systems run a transaction perfectly fast anyway, but if my transaction still has to stop so that someone can look at it, does it matter if it gets to that person in half a second or in three seconds? Well, no, because he's not going to look at it till tomorrow. Dead meat, right? Yeah. But once I can start to use HANA. Use HANA for days to minutes, weeks to days. Yeah. But when I can use HANA to say, well, gosh, if I did this automatically, what would the impact be? Oh, that looks okay. Great. And then I go make that change using some of the other technology SAP Scots. And now I'm starting to feed back into my transactional systems what I learned in HANA. Then you start to get a real sort of, you know, the trading off against each other. You can go back and forth between the two. And then I think he gets in real time. I guess my sense is in terms of the journey we're sort of at the beginning of side by side. Yeah. They're starting to get some of the specific apps. You know, specific areas, they've got good strong use cases. They are starting to sort of package some of that up, make it easier to do. And that's obviously important because some of this stuff is intimidating for people. They don't feel like they're smart enough to use some of these new features. So if you can make them more consumable, that makes people try it and get their feet wet. So that's good. I've been saying all week, it seems like the SAP customer base, they're starved for new technologies and innovative stuff, right? Yeah. What's your sense of that? You buy that? Yeah, I don't know. SAP's community has two very different groups to it, right? It has the people who use the core apps day-to-day to run their business. They put orders in. They put sales orders in. They get their commission checks from it, that kind of stuff, right? And those guys, I'm not sure they feel starved for new technology so much as they want to have the system do more of the work, right? Share the load more effectively. I think the IT guys, they're looking for better ways to run this infrastructure. They're virtualizing everything there. Higher performance. They're trying to run it more like an IT service. So I think, yeah, they perhaps feel a little bit that new technologies recently. I think SAP, I mean, you think of large, complex, expensive, slow to change, and what we're hearing in the last couple of days is mobile, speed, personalization, you know, fast. Yeah. And the apps, but I would say the core application teams are starting to sort of think about that. I mean, you know, I work with the folks on the business side, and they have some great business rules technology that really lets you build some very flexible pieces into the application. And it's surprising how many of the applications now ship where essentially the right holes to plug those in so that when you want to define how I handle a tax form, how I handle a claim, you can change it whatever you need to. And so they're starting to build the apps in a way that reflects that desire for more flexibility. And I think that, you know, that's a good trend for SAP customers, for the people who use the apps, you know, for sure. Even though it's not perhaps a new technology, it's a new way of thinking from SAP's point of view. So James, if we were to ask you, so John and I, sometimes we're called the ESPN of tech. So we love to break down the pregame, right? So we were talking about, okay, what does SAP have to accomplish at Sapphire to make it a home run? If we had asked you that question on Monday morning, what would you have said, and have you seen it? You know, I think they have to make, you know, given the focus on HANA this year, they have to make HANA obviously compelling to people outside the IT organization. They have to be able to go to people who run the business, the CFO, people running the business and say, because of HANA, you can run your business fundamentally better, more profitably, more effectively than you could do before. And I think the answer is sort of mixed. They've made some good pitches around some solid use cases. I think they've got, they've made some good progress on it, but I don't think they've got a home run as far as the majority of their sort of core application uses are concerned. But I think they would come away from this going, they could see how they could do that. Now, so it's interesting to look at the three days. So the day one, you had McDermott doing the keynote, it was kind of superficial. I mean, I think it was. I mean, he's good, he's smooth, but... It was like a politician. Yeah, right, right. Mitt Romney. Yeah. Okay. And then, in the audience, I guess not surprising, it's filled with Republicans and independents. But anyway, second day, Schnabe somehow connected to the audience a little bit better. Product guy, but didn't go deep into the products, but I think gave some credible examples. Today, Hasso went over 99% of the audience's head. And then Vishal, obviously, very credible. A lot of people criticized Hasso's presentation. It's just too complex. But from a business person's standpoint, I actually thought it brought a lot of credibility, because I see, okay, I got a dose of the politician, you know, the credible, you know, product guy, and now I didn't really understand it, but I know they're spending a bunch of money off and they got their best people working on it. That makes me feel better as a CEO. So I wonder if you could sort of break down your reaction to those morning keynotes and the messaging that came forth, and how does that translate to what customers really care about? I think you're absolutely right on the last one. I think the important one, Hasso, to some extent, is trying to demonstrate that he can go a level deeper than you want him to to prove that it exists. Because he can. He can, and it exists, and we have really smart people thinking about this stuff. Okay, and then sort of, you can dial it back a notch and say, okay, I feel comfortable now trusting these assertions that I got earlier in the week, because clearly someone has drilled one level down and got a bit more specific. I still think that the challenge, and it's not just true with HANA, it's true of all these sort of in-memory, high-performance computing kinds of technologies, is as technologists we get very excited about them, how fast they run, and how many of this we can do, and how much that we can do, and we can't always turn that into, and so what? And therefore you can, and I think that to me is, so what's not for the business objects users, not for the knowledge workers, but for the people whose job it is, they run a call center where 500 people log in to the CRM system every day, or the people who run supply chains on the CRM. I'm not convinced we've connected with those. Okay, so not a home run, but certainly putting some in on the base. Okay, that's a great answer. Go people on the base. Okay, so now they've got to drive the runs home, so we'll be watching for tech ads in next year. Now, my other question is a competitive one. We love to look at the competitive stuff, so Hasso said today, well, the people in Redwood City should just back off a little bit, or take the time to really understand the architecture, and it was very typical SAP above-board classy, and we know, of course, that Ellis is not going to do that. He's going to take up the list. There's a lot of things about SAP getting into the database business. They must be on drugs. He said, that's like me going one on one with Kobe. Right? And we love that stuff. Sure. It's good for ratings. It's good for ratings. So what's your take on the competitive posture, SAP versus Oracle? They've made runs before, taken some lumps, but they're trying to change the game. Can they do it? Yeah, that's an interesting question. If you compare SAP and some SAP IBM, these are companies that are willing to put a stake in the ground out ahead of them and say, here's where we're going. This is the vision we have, and then take a couple of years to deliver it, right? Yeah. And normally, when you're competing with Oracle, Oracle doesn't do that. They're probably happy to be a fast follower. Lots of good stuff, but never quite got the same sense of vision. And the only exception is really on the database. Yeah. And the database Oracle is willing to be a bit more visionary. Yeah. So I think it's much harder to compete with Oracle around databases than it is to compete with Oracle in general. Yeah. Because they've got, they're more willing to also put it out there. But I don't think anyone who thinks that any of these technologies is so, is completely impossible to displace or what have you, I think it's delusional. I think, of course you can, of course you can lose out to one of these guys. So we're getting down to cut that to our time here in the segment. So I want to ask a couple of final questions. One is honestly going forward next year, what are you going to be working on personally in your relative to your focus? And talk about the change. So that's one question. The second question is, what's happening in the services business that's changing? Obviously, you know, when you have these inflection points, it's a tsunami of new solutions. And people will make more money. There's money making opportunity for all involved. So break those down. One, what you're going to work on, what your focus is, and then the impact of the, I guess, channel, I thought better work, consultants, integrators. You have these new opportunities. All the money's changing hands now. Sure. So we'll talk about that. So the first thing I think is, what's interesting to me is, is the way SAP has been restructuring its core applications to make them easier to embed more flexible decision making. To make them more of a partner in how you run your business. Instead of saying, here's a transaction, it's going to sit in the SAP system so someone comes along and presses a button to say, okay, what can I do with that transaction? Can I do something with it now as the system? And they've made that possible in a lot more of their apps. And so I'm going to be working with clients who are like, excited about that opportunity and say, okay, instead of touching 100% of these transactions, maybe I can only touch, I only have to touch 5%, 2% or 1% of these transactions. The right percent. And the rest gets handled by the system. And that's becoming possible with the ERP systems and the CRM and the tax and planes processing. I think that's a really exciting change in the way SAP builds its applications. And I'm looking forward to that. I'm also hoping to work with some of the predictive analytics stuff that's coming out of the business objects group who are beginning to take their analytics infrastructure and move into this data mining predictive analytics area. And that's an exciting change to it. I'm looking forward to that. From a consulting point of view, I think the challenge here is that the initial money with any new technology goes to the people who just understand the technology because it's too complicated. No one understands it. But the real money comes when people can say, I can use this technology to give you a better ROI and change your business in some way. Solutions. Yeah, change some ratio in your business. Okay, if I can do that, then instead of having more of these kind of people as your business grows, you can keep that flat and grow your business anyway. And I think we're going to see that with the high performance, the in-memory, the analytics. We're seeing it already with rules and predictive analytics. I think that's really big data has to go through that transition. That's what we're going to do. Okay, James, great angles on that perspective. You have an exciting agenda ahead of you. We'll hopefully get you in Palo Alto, Cuba. We're in the same town, same school. Daughter's graduating fifth grade. Got my son in fourth grade. So, you know, it is 12th grade years at a Loni school in Palo Alto. I feel like I lived there. They probably feel that way too. I love the angle on the services and the consultants. I think that's totally right on the money. Thanks for your perspective. We'll be right back with our next guest after this short break. Thanks very much, Chris.