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Tim O'Reilly

Tim O'Reilly

SAP as a Web 2.0 Company?

I bet most people would regard the title of this post as an oxymoron. Surely SAP is a big, boring enterprise software company, about as far from the furious consumer innovation of Web 2.0 as you can imagine. Yet it's been clear to me for years that SAP takes the ideas of Web 2.0 very seriously. Before we'd even formalized the term Web 2.0, I did a brainstorming session back in 2003 with SAP's strategy team about the idea of collective intelligence, which to me is the heart of Web 2.0. That conversation helped to develop the idea (which I've since shared with many companies) that even in an enterprise context, setting defaults so that information is shared can lead to powerful network effects. Why should the second company configuring an application for local business rules or a particular configuration have to repeat that configuration, if instead, it could be shared by the first customer. Simply by changing the defaults for what is public, it's possible to build applications that get better the more people use them.

I was invited to keynote [Dan Farber's summary] on Monday at SAP's Tech Ed Conference. In addition, I did a 45 minute Q&A with SAP's Mark Finnern [video] as part of their "Community Day" unconference (modeled on Foo Camp), which preceded the main conference. I also did an extended video interview for the SAP podcast series from the conference [video].

As you can see from the fact that the videos above lack YouTube-style embed codes and can't be shown here, but only on the SAP site or downloaded to a local podcast client, they are still struggling with some of the key ideas, but I have to say that in the prep work I did for my talk, I came across some projects, particularly from SAP's "Imagineering" team led by Denis Browne, that are really impressive and forward looking. I spent some time with SAP's CTO, Vishal Sikka, and it's clear that SAP understands that the trends that are driving Web 2.0 in consumer internet applications also are going to have a huge impact on enterprise software.

I particularly liked the demo of a project SAP is working on with a large property manager in Switzerland, to build models in Second Life that are tied via sensors to real buildings. The prototype is only a small model building, a doll-house, so to speak, but this is definitely the future of property management: open a door in the real building, a door opens in the SL analogue.

This prototype is also very on trend with one of the big ideas we have about where Web 2.0 is going, towards Web 2.0 applications that are fed directly by sensors, so that "participation" no longer just means typing on a keyboard, but the accidental information we create "merely in living as and where we live."

SAP is also doing some great "in vivo" co-development with customers, with customer innovators invited to spend six months working directly with the imagineering team at SAP, reporting what they learn back to their company via blogs, wikis, and podcasts. I've often noted that Web 2.0 actually began with open source and collaborative development as early examples of how networking changed business processes. Here's a really practical way for enterprises to put new forms of collaboration to work.

SAP's also got their own internal social network, called Harmony:

SAP Harmony

Dennis pointed out a couple of the unexpected benefits of a social networking environment in large company HR practices. Simply by watching what groups form, they were able to learn more about employee interests than from any number of surveys. For example, as a result of the large group that formed on meditation, they added "quiet rooms" to some of their facilities; seeing the interest in ping-pong, they added ping pong tables. Small things, but collective intelligence at work nonetheless.

tags: enterprise, SAP, talks, web2.0  | comments: 22   | Sphere It


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Comments: 22

Daniel Haran   [10.03.07 02:49 PM]

Is that logo lifted from another site? it looks very familiar.

Cornel Schoeman   [10.04.07 12:26 AM]

SAP has embraced new technology, with the launch of SAP Business By Design, it is clear that the company is following a new road with software design. We are very eager to see the uptake of the new products by customers.

Tobi   [10.04.07 12:30 AM]

SAP still needs a long way to go. The thinking part is what needs to change. Noticed the nice RSS logo in the top right corner? Nice thing but still there is RSS reader that can be used on SAP computers in compliance with software whitelisting rules.
The same problem arises with the intranet where even syndicators like Google Reader don't work because the intranet is internal ;)

Tobi   [10.04.07 12:33 AM]

PS: The flickr API seems to be slowing down the loading times

Ignacio Hernández   [10.04.07 08:55 AM]


So, you are saying, if I am a retail company and I'm using SAP, I am collaborating to make SAP product a better product, because my configuration can help to SAP to give it product to another retail company without repeating configuration...just one retail customer sharing it configuration with other retail customer...
When I go to a web2.0 app ( like flickr ) I explicitly know that my "value" are going to be public, when I'm implementing SAP product I DON'T want my "value" (my configuration) public to other retail customer, maybe SAP is doing that for a long time ago and maybe that is reason for value of it product...just taken value for it customers to make a more valuable platform, it really clear for SAP customers ?

By other hand, I think there is a lot of thinks happening in web by last years, great, you put it a label "web2.0", and that was great, we had a way to call it, excellent. But calling SAP a "Web 2.0 company" is a different thing, I can agree that SAP are using web2.0 apps externally and internally, but "web2.0 company" can be a deceptive concept, what is a web2.0 company ? just a company using web2.0 apps ? when you (or your team) put "web2.0" label to thinks happening in web was clear to me, but now it's not clear about "web 2.0 company" concept.

Finally, I'm really an admirer from your work, thanks for your guide.



Tim O'Reilly   [10.04.07 09:06 AM]

Ignacio -- No, I'm not saying that SAP is sharing your configuration info without your knowledge or consent. I'm just saying that sharing such data (with consent! but perhaps by default) is one way an enterprise software company *could* create network effects that make its software better for each user as a result of the participation by other users.

Other ways might even be for customers to share private sales data with a third party provider in return for "norming." Thomson has a service like this. Law firms upload their legal records so that they can see what share they have of the business at major firms in each category: "You have 3% of GE's compliance business."

By my definition, a web 2.0 company is one that uses internet-fueled network effects to build services that get better as a direct result of user interaction. Figuring out all the clever different ways to do this is the heart of Web 2.0.

Phil Crissman   [10.04.07 01:15 PM]

Very interesting that such a big corporation is doing something like this.

Full disclosure: I work for Oracle... there are some folks here, notably the guys behind who are pushing new things. I think the Big corporations, in general, will be slow to embrace this sort of thing.

They'll talk about it a lot, though.

Ignacio Hernández   [10.04.07 04:00 PM]

Phil, excellent to know about that, maybe we can ask "Oracle as a Web 2.0 company ?", I think in this next year we can expect something like "*put your company name here* is a Web 2.0 company".



Rob Roberts   [10.04.07 05:04 PM]

I saw the presentation and really liked it. As for Ignacio's comments, it's not so much your configuration as the way you might use the system that creates better software for everyone.

For example, consider a sales order scenario where the salesman enters the order in a CRM system that interfaces to the backend SAP system. Only the sales person records an interaction scenario with the customer. But what if shipping and receiving was always processing returns for that customer because "we sent the wrong thing" or better yet because "the wrong thing was ordered". That would add to the system usability, but items that like are currently not recorded in such a way that the salesperson might see them. Collaborate on the [insert functional area here] experience and improve everyone's experience.

Tim O'Reilly   [10.04.07 05:13 PM]

Great example, Rob. A lot of Web 2.0 is really simple things like this: thinking through how to create intelligent feedback loops in products, so that information flows through the system in the same way it flows through our own brains. That's one reason why I love Microsoft's term "Live Software" and regret that it's too narrowly associated with Microsoft's online platform rather than the whole class of software that gets better the more people use it.

Ignacio Hernández   [10.04.07 06:31 PM]

Rob / Tim

You have to understand, in an enterprise environment, the idea that my configuration or the way I use SAP software can help another SAP customer (maybe my competition) is not easy to digest.

Vornamen   [10.05.07 03:20 AM]

That doesn't belongs to that article, but where do you got those pictures for your article?

Spencer   [10.05.07 03:22 AM]

> You have to understand, in an enterprise
> environment, the idea that my configuration or the
> way I use SAP software can help another SAP
> customer (maybe my competition) is not easy to
> digest

That's how consultants work and everybody knows it - some want them because of it, or despite it, and some avoid them for that reason. When _you_ hire them they also bring with them industry knowledge and guess where the got that from...

> Simply by watching what groups form, they were
> able to learn more about employee interests than
> from any number of surveys. For example, as a
> result of the large group that formed on
> meditation, they added "quiet rooms" to some of
> their facilities; seeing the interest in
> ping-pong, they added ping pong tables. Small
> things, but collective intelligence at work
> nonetheless.

Collective intelligence? Are you sure you meant to use that word in that context? If one person or a group of persons makes decisions/judgements based on observations it's the plain old kind o intelligence.
Now, if those ping pong tables had "emerged" through some uncoordinated group effort, where everybody felt like bringing some part of a ping pong table - that would have been collective intelligence. ;-)

Michael R. Bernstein   [10.05.07 04:24 PM]


Tim, is the word 'intelligence' in 'Collective Intelligence' used in the sense of 'quotient' or 'military'?

Tim O'Reilly   [10.05.07 05:02 PM]


I was thinking "quotient," but I'm sure that "military" is also aware of the potential...

Michael R. Bernstein   [10.06.07 11:30 AM]

Tim, I wasn't specifically thinking of them as a consumer.

The 'military intelligence' sense of the word is actually roughly the same as the 'business intelligence' sense, and probably a few other variants that escape me right now.

But all of those senses of the word 'intelligence' are rather different from the separate 'IQ' sense of the word.

Michael R. Bernstein   [10.06.07 01:18 PM]

Further clarifying what I'm getting at, you've repeatedly talked about these techniques making systems 'better the more people use them', presumably meaning better for various specific and concrete purposes, but you've never advanced the claim that these techniques make systems 'smarter' at least in the generic AI/IQ sense.

At least, that's how I've been interpreting your writing on this topic.

Tim O'Reilly   [10.06.07 02:06 PM]

Michael --

Right. It's "better" in a way that may be orthogonal to intelligence. EBay is better than Joe's auction because it has more participants. But it isn't necessarily smarter. Amazon gets better as a product catalog because it has more reviews. That arguably is a bit "smarter," but it's in features like "people who bought this also bought" that Amazon really gets smarter. And it's not clear that those algorithms get substantially better as you add participants.

Flickr and YouTube get better with more participants just because there's more stuff to choose from, and hopefully more good stuff. Openness and virality feed that improvement cycle. But they are only "smarter" to the extent that they mine user behavior to improve the search.

Google is clearly a very strong example. Its index gets better as there are more quality sites (but worse as there are more spammers); its ad auction likewise. It learns from user searches, it learns from people's link behavior, it learns from user's click patterns, it learns from what ads are clicked on. Its whole competitive advantage is in being better at mining and responding to the participants in its ecosystem. This is very close to "intelligence."

Skype (or any communications network) is better with more participants. But the real opportunity in communications is in fact to extract a layer of intelligence based on all that user activity. There's a revolution waiting to happen there. (See various posts I've done on "Address book 2.0." Xobni is productively mining this turf.

So network effects-based systems are the basic loam in which web 2.0 collective intelligence applications can grow, but it requires tending and harvesting the intelligence, and not just letting the network effects remain "dumb."

This is really the heart of Web 2.0 -- the network effects were there all along, but as the internet matured, people figured out how to harvest them in new and creative ways.

Conficio   [10.07.07 03:10 PM]

SAP has not to invent the collaborative model with its customers. It has been build on this.

SAP has for years been an open source company, albeit not a free open source company. Not withstanding, that todays SAP management claims open source is evil business. SAP always shared their application code with their customers (licensees) and they in turn did modify it or build their own additions and extensions.

Such customers quickly learned that software development costs are not sunk costs, but rather that the maintenance costs are larger than the original development costs. This is especially true in an environement where the underlying platform (SAP standard releases) does upgrade frequently. Many customers with theri own extensions have tended to approach SAP for integration of their code base into the standard, this way benefitting the overall eco-system. SAP usually did not pay anything for this code and customers were happy to just save the maintenance costs and have a faster upgrade path.

This is a big part of SAP's success.

Tim O'Reilly   [10.11.07 08:46 AM]


What logo are you talking about?

Alexander Pohoyda   [10.12.07 06:29 AM]

Earlier in the year, Hasso Plattner, one of the company’s founders said the company made an early mistake by allowing customers access to the code. This lead to code proliferation and the creation of one off processes over which the company had little control but which it has had to support ever since. Expressions like ‘never again’ and ‘over my dead body’ are the ways in which SAP executives have described their forward looking approach to customization. Instead, Kagermann adds: “We’ll provide rich configurations and extensions as and when customers are ready. But not customizations.”

Benny Schaich   [10.19.07 08:30 AM]

statements about customization where meant about the new Business ByDesign. To withdraw the customization abilities in existing SAP software is absolutely impossible.
And you might have seen that ByDesign is planned in a much more affordable way then todays standard SAP software - which means it needs to be produced less effortlessly. And this is why modifications are planned to be excluded.
However, the SOA paradigm opens much different ways of modification for the future so that something like ByDesign might not even be needed to be changable.
We will see.

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