In this episode of Enterprising Insights, host Keith Kirkpatrick is joined by Robert Kramer, VP and Principal Analyst at Moor Insights & Strategy, to discuss using data to enable ROI from AI deployments. The pair discuss this topic through the lens of several events they attended in recent weeks, including SAP Sapphire, Zoholics, PegaWorld iNspire, and Databricks Summit. The two conclude the show, each contributing a Rave to the Rant and Rave segment.
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Transcript:
Keith Kirkpatrick: Hello, everyone. I’m Keith Kirkpatrick, Research Director with The Futurum Group, and I’d like to welcome you to Enterprising Insights. It’s our weekly podcast that explores the latest developments in the enterprise software market and the technologies that underpin these platforms, applications, and tools. This week. I’m really happy to be joined by Robert Kramer. He’s a VP and Principal Analyst with Moor Insights & Strategy, and Robert covers data in ERP, really anything related to data, and Robert and I have crossed paths quite a bit this past spring, so really glad he’s joined us. Welcome, Robert.
Robert Kramer: Thank you. Happy Friday. It’s been a long week. Good couple of weeks though.
Keith Kirkpatrick: It has, yes. Well, as I mentioned in my open, we’ve been to a bunch of events over the past few weeks, and some we’ve attended together and some we haven’t crossed paths with, but I wanted to start with SAP Sapphire, which is an event that you went to, big event you attended in-person. I was wondering if you could just give us a brief synopsis of the events and any kind of takeaway you had.
Robert Kramer: It’s a very interesting event. It’s basically their big event of the year, lots of customers, and as we know, SAP is in good standings. They have great arenas and they have some key strategies around data and surprisingly AI, everybody does, but they’re embedding AI throughout all their solutions, and they’re trying to improve some of their products, and some of those are RISE and GROW to move some of their customers to off-prem from on-prem, which is a big problem, and we’ll get into that with the data management discussion that we’re going to talk about, but they had a lot of their new announcements were around that adoption to cloud.
A lot of their features are only going to be available in the cloud, so if you’re on-prem, you’re kind of stuck. They have some new tools available for these integrations with their business technology platform and they have some of the things that I think were really key is their new partnerships. I’m not sure if you’re familiar with some of those, but with Microsoft and Google and the video, and et cetera, and also a key acquisition with WalkMe. So everything is really around moving these customers to the cloud to take advantage of the solutions there, and also the fact that you don’t want to have multiple versions with all these companies having their ERP on-prem, it’s impossible to support them. So it’s really centered around that and AI. So that’s a long-winded answer though.
Keith Kirkpatrick: No, absolutely. Robert, you mentioned a really good point there. If we think about SAP and what they’re trying to do, obviously, they want to get folks to move to their cloud-based offering because, obviously, they can deliver innovations to scale there. They’re obviously going to generate a lot of revenue when you’re moving to this work and in the cloud. I guess what is the big hurdle though for organizations? Because it sounds great on paper, “Hey, let’s move to the cloud.” What are the big challenges involved? Why is there such an effort in getting companies to move there?
Robert Kramer: Well, a lot of companies have bastardized their system, so they have an enormous amount of customizations. When you have these customizations when you migrate, those customizations don’t necessarily go forward. So it’s one of those things where if you move, you have to either make the changes in the new implementation and new software that you’re going to adopt or you have to get rid of it. It’s one of the problems that they don’t see the ROI, and it’s a huge process of change management and data quality and getting all this information to the new system, but SAP is going to take the stance that these features that they’re releasing are only going to be available in these new versions. I don’t blame them, but at the same time, it’s creating a revenue stream for them that they’re forcing these clients to go there. It’s going to be an issue as we continue down this way, but at the same time, there has to be … From a software provider’s perspective, they can’t support all these versions at the same time, but they have a monster of an application and you have to have an ROI and a business impact for these companies who want to go through this program of RISE, which is their cloud migration offering.
Keith Kirkpatrick: Right. You also referenced something really interesting. I think it was right around the time of Sapphire that SAP announced their acquisition of WalkMe, which has their adoption platform. Can you talk a little bit about why is that significant for SAP? Because obviously, if I understand correctly, they paid about a 45% premium based on WalkMe’s fair price.
Robert Kramer: They did. Well, that’s a good question. We’ll have to see what that does, but part of the problem that they’re realizing is as you look at the global enterprises, 70% of the data is still on-prem. About 50% of all global enterprise softwares are ERP and SEM. So there’s an enormous amount of money, I guess you would say, in these types of applications. So how do they get the adoption? This is part of that. It’s a software that could help with the change management, with the adoption of programs like RISE to move companies over from the on-prem to the cloud. It’s a way to help the migration less painful, and I think they’re seeing that they have a problem there. Companies are not adopting this RISE program as much as I think that they think that they are because an enormous amount still on-prem as we just discussed.
Let me ask you question. If you owned a manufacturing company and you had 10 facilities, multi-company, multi-region, multi-language and you have hundreds of customizations, are you going to move your system into the cloud unless you see some dividends that make sense? So I think that that’s the architecture that has to happen behind SAP’s endeavor in this. They have to show these companies that ROI.
Keith Kirkpatrick: Right, and one of the things that you mentioned there, if you have such a huge lift, there’s got to be a lot of expense around that, and if you’re a manufacturer and you’re a public company, you’re operating on a quarter to quarter basis. Making that venture is a lot harder when you go, “Well, we’re spending all this money and it’s going to take us 12 months, 18 months, 24 months to realize ROI.” Sometimes that’s a hard case to make when you’re evaluated on a quarterly basis. So yeah, good point there.
Robert Kramer: Yeah, but also, do you have the people and the processes to do it? I think that’s a huge component to this because you have to have the talent in-house and you have to have the processes to get it done. Otherwise, you could have the great software but you can’t get it implemented, and then the data quality issue, is the data good in the on-prem system? What changes have to be made to get it to move? So this is why it’s going slow.
Keith Kirkpatrick: Yeah. I think that’s one of the reasons why they acquire WalkMe because their digital adoption platform, one of the thing that does is gives more visibility into what they actually have deployed on-prem or perhaps in the cloud or a hybrid environment. You can’t do any sort of lift and shift or whatever if you don’t even know what you have. I mean, what licenses do you have that are being underutilized? Are you having legacy applications that have been sitting out there and may contain data that is critical to the organization? It’s really great to be able to get that visibility, and I think that’s one reason why they did pay that premium.
Robert Kramer: Yeah, and I can’t recall the names of the applications, but they’ve bought in a few other companies that are business process companies and also IT portfolio management and architectural companies to help with this program that they’re trying to get done. So they got a long way to go, but that was really the basis of Sapphire. It wasn’t eyeopening, but it was what was expected.
Keith Kirkpatrick: Right. I think you were mentioning Signavio and LeanIX were the two companies that they acquired.
Robert Kramer: Yeah, that’s right.
Keith Kirkpatrick: Great. Great wrap up there. I mean, certainly, I was able to join a few sessions from the plane. Don’t tell the airline I was screening, but certainly very interesting.
Robert Kramer: And you went to PegaWorld, correct?
Keith Kirkpatrick: I did. I just got back from PegaWorld. It was held in Vegas. Again, lovely Las Vegas with a temperature of 107 degrees, but it was a dry heat, as they say, but really interesting event because if you think of what Pega is trying to do, they’re trying to carve out a niche for themselves really focusing around optimizing workflows because, ultimately, that’s really what we’re looking at here. It’s great to sort of say we can use generative AI to summarize a call or generate an email, but really, you only get those benefits where AI is distributed throughout the entire organization.
Really, a couple key takeaways I have from the event. They have mentioned, and it was so good to hear this, that they’re not just talking about generative AI because as much as that is sort of the shiny object on the hill, they’ve said, “Look, you have other types of AI, predictive analytics-based AI, you have decisioning AI. All of those are going to deliver a lot of benefits to organizations in terms of enabling automation, productivity.” Again, the thing they really kind of honed in on was the use of generative AI to really enable organizations to complete that digital transformation, looking at those workflows, seeing where there’s inefficiency, and then using AI to connect the dots to go, “Hey, instead of going step one, two, three, four, five, we can go step one, six, and whatever, and base that on any kind of data that we’re getting back saying, ‘Hey, we’re going to miss this SLA. We’re doing two things twice.'” So I thought that was really interesting.
Robert Kramer: That’s great. So their-
Keith Kirkpatrick: Go ahead.
Robert Kramer: So their main play is data and AI, right? But what’s their vision after that? Do they go through that?
Keith Kirkpatrick: Sure. Well, one of the things that I wanted to also mention is they also highlighted this application is called GenAI Blueprint. Now, this is essentially a tool that people can use. You don’t have to be a data scientist, you don’t have to be a developer or an IT to say, “Hey, I’m working in, let’s say, finance, and currently, our bill pay application is clunky. It doesn’t work well. There are issues.” They set up this application that uses generative AI to go in and say, “I want to create this application. You put in the parameters of here’s what you’d like, what data you need. Here are the processes you’d like to do, and it will mine not only Pega’s repository of insights over the past 40 years, but it’ll actually go out to the internet and try to pull in relevant information to help you create a blueprint or an architecture for an application.”
You still need people to go, “Yes, that’s good. Yes, that meets our policy. Yes, it meets regulatory concerns,” but once you have that, then you can take that blueprint, put it through app studio and develop an application, and the goal here is to increase productivity.
Robert Kramer: That’s sweet.
Keith Kirkpatrick: So Alan Trefler said 50% productivity increase. We’ll see if that actually happens. It’s a bold claim, but I played around with this blueprint and I was impressed.
Robert Kramer: It sounds really cool. Where was it in Vegas? Was it in a nice place?
Keith Kirkpatrick: At the MGM brand, which I’ll be honest, no offense to any hotel there, but all hotel rooms look the same to me. All conference rooms look the same to me.
Robert Kramer: They kind of do in the end.
Keith Kirkpatrick: Yeah, absolutely an interesting event. The other thing I wanted to bring up here is we were at an event together down in sunny and somewhat humid Austin not too long ago for Zoholics.
Robert Kramer: Yeah. So I got this new hat. I mean, this is a heck … I mean, they welcome you to Texas and this is what we get. I couldn’t even check it. I had to carry it and I wore it on the plane, but I don’t know. What do you think?
Keith Kirkpatrick: Looks great.
Robert Kramer: I’m too Texan now.
Keith Kirkpatrick: There you go. The hat I got, the security folks at TSA made me wear it through the security scanner I think more as a joke than anything else, but yeah. Well, what were your impressions? First, give the folks a brief overview of what Zoholics is and any kind of takeaways you had.
Robert Kramer: Yeah. So it was my first Zoholics, and Zoho, really, it’s a CRM and an enterprise app all in one. They have, what, about 55 different applications that you can choose from, something like that, and it just depends where you’re at on your businesses, what you need. So when I went there, I was really pleasantly surprised. It’s a cult following. There’s a lot of customers that believe in it, love it. It’s really for companies that are a small to medium size, they have a very, I guess, a cost perspective of a low entry to get customers in, and they’ve expanded to the enterprise section, meaning to have accounting and billing, and I guess they have some inventory control and things of that nature to lead into companies that are medium size vendors of a net suite or sage to kind of take some of that business.
What I got out of it, I guess at the end of the day, was I like that you can control your data and keep it under one roof. I mean, I think these companies go down their growth stages. The data management is a key component, but also your technology stack. As we get further down in this discussion today, the technology stack is a big deal because when you open yourself up, they have all these different types of software applications. There’s problems that will occur. So I think they really hit a void that I was pleasantly surprised about. What was your thoughts?
Keith Kirkpatrick: Yeah, I would agree. I mean, if you think, like you said, Zoho is sweet spot right now. It’s SMB to mid-market. They do have a few, I guess, enterprise, and I’ll put that in air quotes, clients, but really, if you think about their pricing, it is geared towards smaller organizations, so they can actually do a land and expand thing saying, “Hey, we need a CRM. Oh, I’m happy with the CRM. It’s reasonably priced, works pretty well. Hey, I’d like to pull in my e-commerce solution. I’d like to pull in my billing solution.” To your point, I think for these smaller organizations, they need to be worried about data management, data governance because of the fact that they don’t have these massive staff, resources to handle that, to pull in other consultants having that on a single platform.
Then of course, the other thing that Zoho certainly wanted us to reflect is that while they do have this centralized platform, they do have integrations with other things because let’s face it, it’s few and far between any organization is a true single platform vendor. The other thing I’d like to mention there that’s really interesting is they are a privately held company. They had a whole presentation really talking about their core values, all of which were really laudable. They haven’t fired anyone in gosh knows how many years. They take an ethical approach to where they actually locate their offices. They tend to go second and third tier markets, hire locally, and then pay them a wage, people wage, that is fair, and then they don’t ask people to move to Silicon Valley or to New York or wherever. So it’s a very interesting company. The only question I had after all of this is, what is the potential downside? Not everything can be rosy, but today, I’m not sure. I think the only thing I would say is that as they grow, it might be hard to maintain those values.
Robert Kramer: Yeah, I think so, but your employees are your biggest assets and you empower them, you’ll get more out of them, and I think that’s the mantra for Zoho. The business model is unique but good, and also the low entry point because once companies put all their data into an application, they’re not going to want to really move it unless there’s a compelling case for that. There has to be a business value for them to do that, otherwise they’re going to stay where they’re at because it’s time-consuming. Your time is worth money. So when companies say, “How much did it cost?” they can’t just say, “Hey, it costs …” whatever you put on a piece of paper from a financial where you move money. It has to be what it costs physically for those people to actually do the work. So if it takes this amount of man hours or conversations, even this discussion here costs out money because of the fact that we’re talking. So I think that it’s something that Zoho has figured out how to maximize that certain small to medium business. So kudos to them.
Keith Kirkpatrick: Yeah. The other thing I think that’s important to mention about them, and really, we could say the same thing about SAP, about Pega is, obviously, AI is a focus. Everyone is rolling out their assistant. Some of them are called Copilots probably more than I would like to refer to them, but others are … Pega has their GenAI Buddy, what have you. I’m curious to get your impression on all of these GenAI assistants. Are they going to become essentially table stakes pretty equivalent in terms of overall functionality? What’s your sense?
Robert Kramer: I think that they’re only going to be successful if the data is there to use, to be utilized by AI. So I think companies will fail if they don’t have a successful data management strategy because the data is the key to the success of AI, and if they have it put into place, I think it’ll be very good, but at the same time, I’m not sure that most companies are focused on that data management strategy. They’re looking at these demos and these really nice … It’s like going shopping and you walk by a window and it looks good, but my physique doesn’t really lend to putting those clothes on, it won’t look good on me, but it looks good there. I think it’s not the best analogy, but at the same time, how is it going to work? What are the keys? I don’t think the vendors are really telling their customers what they need to have in place to have a successful AI program, and that means the processes, again, the people, and putting that in place to maximize, and what does the data set look like, what’s the connection to your ERP systems, what other datasets are necessary to maintain that equality, and then I get my AI strategy to be successful. What’s your thoughts?
Keith Kirkpatrick: Yeah, I would agree with that, and I would say that the problem is that, as you mentioned, it’s very appealing and very interesting to talk about generative AI and all the crazy things that it can do. When you start talking about data management, data governance, that’s where it doesn’t sound as sexy, but it’s actually even more important. I would love to get your thoughts. You went to another manufacturer. You just got back from Databricks. I’m curious to see if there was any discussion about these more fundamental topics around data.
Robert Kramer: Yeah, So they have a data intelligence platform, and theirs is all about data and AI. They have a very interesting story, and what the intensity of this event was was actually fabulous. I was very impressed. So they’re kind of that middle layer. So if you have all these different applications and you need a platform to put them and just the data, data does not sit with them, it sits where it resides, then you have a chance to put together the intelligence around all that data and the applications that the data is coming from.
An example is I talked to, and this is a wild story, one of the major top five airports in the country. I sat down with them to see what their take is on Databricks and how they use them. They have about 250 different applications and none of them talk to each other. This is a major airport and I’m like, “Well, who’s the genius who put that together?” So anyway, none of them talk. So what is going on is Databricks has put that together. They have a dashboard that puts everything into a nice gift wrap dashboard. Now, they can understand the passenger journey. They can understand the parking, the traffic going into the airport, what flights are on time or not, what, I guess, terminals are crowded, what baggage claims, on and on and on, information about the actual person that’s traveling.
So the traveler’s journey is a big deal, and now they can really make adjustments. If I told you that airport, which I will behind the scenes, it still runs pretty well, but at the same time, Databricks has a chance to aggregate data and AI together to give this intelligence that I think that that middle layer that is going to be very popular, which already is. It’s gigantic. I think it’s about a $45 billion company, something like that. This is one of those mainstreams. Snowflake does the same thing. Another company called [inaudible 00:21:59] does it as well. So these are going to be more of a way to put the glue that’s needed, the gap between all these ERP systems and these SaaS applications.
Keith Kirkpatrick: Yeah, I’m glad you raised that issue because I think when we look at it, we step out and go, “Why are there 45 different ERP systems?” A lot of it is due to either acquisitions or even just … I mean, you look back in the pandemic a few years ago, sometimes companies had to stand up things very, very quickly just to get something done. Now that they’ve been able to take a breather, they go, “Oh, my gosh, I have data here, data there, data everywhere. It’s not talking. We’re not getting insights. We’re not able to look at things holistically and then apply AI and really automate a lot of these processes that …” It’s 2024. We should be at least halfway to the Jetsons by now.
Robert Kramer: We should. At the same time, I think ERP companies are starting to modernize, meaning they’re being more flexible. They’re scalable. They’re not as traditional on-prem and limited features, so they’re taking advantage of the technology like the AI that we’ve been talking about. At the same time, you have this middle layer or you have intelligence platforms that are allowing to put different systems together. I think the one thing that needs to happen is companies need to evaluate before they just grab another SaaS application and add it to their technology stack because all it is it confuses everyone, and then how does the data get there? Who owns that responsibility? That’s really one of these caveats that I think is a growing problem and a headache for these technology officers, and probably more to come chief data officers because how are you going to manage all this data and where it goes and why do you need it?
So I think these intelligence platforms will help reduce that, but at the same time, the modernization of the ERPs will bring that as well, but really, it’s a big subject because when I was talking to the SAP folks, I said, “Who owns that responsibility for the data?” and they don’t necessarily think they do. They just said, “You use our system, here’s the data, and then we’ll help with these programs,” but at the same time, the vendor who it’s going to owns that problem, and I think that that’s a gray area right now. What’s your thoughts on that?
Keith Kirkpatrick: Absolutely. We’ve talked about this at different events over drinks at the bar, and it’s a problem because, again, if you think about it from the vendor perspective, their goal is to provide a particular offering to help them do a specific thing. I think a lot of times the lines between who owns what data, who owns the responsibility for vetting it, making sure it’s clean, making sure that it’s usable, you run into this whole issue where nobody wants to take on that responsibility because it’s huge, but I think that, ultimately, there will be a need for someone to come in and take that responsibility. Because now you’re seeing organizations rely on data that is outside of their organization, what I used to call ambient data where it’s like, “Hey, I’m going to the airport, but also, I want to incorporate things like traffic data or weather data or whatever else to really provide that customer with a full picture of what’s going on,”. But if we don’t know where that’s coming from or the validity or going back, and that’s not a great example, but you get the idea. They really are trying to federate data from a lot of different sources.
Robert Kramer: Right, but the responsibility has to be owned and then the customer, they may or may not be savvy enough, and I think it poses a tremendous problem. Then that’s part of the issue where we go forward with. Is data management successful? Is your AI going to be successful? It could be the fall of AI at certain companies because of this whole process that we’re talking about, that data is not moving over correctly, there’s not proper governance in place to get it all done right, and then there’s no change management to make sure it’s processed correctly.
Keith Kirkpatrick: This all sounds like everything it does go back to becoming a people problem in terms of making sure that policies, people align with the technology.
Robert Kramer: Yeah.
Keith Kirkpatrick: Yeah, but we could go on for hours and days and weeks and months and years about this, but we do need to wrap up. As you know, Robert, one of the favorite things I like to do at the end of the show is provide an opportunity for you to rant or rave about something in the market, perhaps something in your travels. So I will kick it to you first. Do you have a rant or rave for me this week?
Robert Kramer: Well, let’s think about that. I think I’m going to rant a little bit about … I like Databricks. I like the way that their intelligence platform gives data a chance to be better, and it was an eye opening event. They really did a great job from just the process of taking care of us from an analyst perspective, allowing us to meet the right executives, allowing us to hear the things that we needed to hear, and explaining how they’re going to influence the market and change the market. I think that that’s a big topic today because data, it’s not just about the features, it’s about the functionality and the ROI and how the business impact is affecting these customers. So that was really something special, but there’s a few other companies that do the same thing, and I like that space, and I also like the companies that help with these integrations, like a Super iPaaS with the software AG and a few other ones. So I like that middle layer. I like to rant about that a little bit in a positive way. How about you?
Keith Kirkpatrick: So a rave not a rant.
Robert Kramer: Sorry. I haven’t been on the show a lot. I was confused. I had my hat on and now I got home late, 2:00 in the morning last night from San Francisco, so that’s a rave and give kudos to Databricks for a well done job.
Keith Kirkpatrick: Awesome, awesome. Also, for some reason, I’m in a good mood and I will rave about something as well. Being at Pegasystems, one of the really interesting things was we did a pre-briefing session for press and analysts, and their CTO, Don Schuerman actually came out and said, “Yes, we have a chatbot. We have an assistant to help you do things with generative AI, but we understand that that will become table stakes. We do not believe that to be the reason that we are winning in the market or losing in the market.”
To me, it was refreshing to hear that candor that AI in and of itself is not going to be a differentiator. Everybody’s going to have it. Everyone’s going to have their own version of a chatbot. Everyone’s going to have their own version of an assistant to help a call center agent. What really is going to come down to it is, how can a vendor help an organization manage its data to get the most out of those tools? How can an organization leverage generative AI to really look at the processes and workflows that underlie or underpin everything else in the organization?
So it was great to hear that because we both go to a lot of events and everyone says, “We have the best this,” or, “My chatbot …” all of that kind of stuff, and it’s just really nice to see an organization realize that, “Hey,” or admit that, “Hey, we have good technology. We like it. We wouldn’t develop it otherwise, but in the end, that’s not how we’re going to compete and win.”
Robert Kramer: Yeah. One question about that. So one of the things that I did see is at Databricks, they talk a lot about collaboration, that to get rid of the keyboards to collaborate, that will never go away, but the combination of the data, the AI, and the collaboration is really the key. I haven’t heard a lot of companies talk about how important collaboration is. They talk about it, but the key to success, I guess that goes back into the processes and the people. Was that talked about at Pegasystems?
Keith Kirkpatrick: Yeah, absolutely. I mean, the collaboration is going to be the key for everything because if you think about how in the past if you were to develop an application, your collaboration was, “Well, let me request it from IT.” IT comes back and they give you something, you go, “This does not what I want it to do.” You go back and forth and back and forth. You’re time wasting. Now, by using an app like Blueprint, you’re able to collaborate in real time with whoever the stakeholders are before and during the planning process, so when it is ready to be developed, you have a finished plan. You save time, you save money, and effort. Everyone gets to what they want and, hopefully, you don’t get to do it again, so absolutely.
Robert Kramer: Sounds good.
Keith Kirkpatrick: All right. Well, Robert, I see by the clock on the wall that’s all the time we have today, so I want to thank you so much as always for joining me here on-
Robert Kramer: Thank you. Pleasure.
Keith Kirkpatrick: Absolutely. To everyone out there, I’ll be back again next week to report on all the happenings within the enterprise software market. So for Enterprising Insights, I’m Keith Kirkpatrick. Thanks a lot and have a great week.
Author Information
Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.
