The latest issue of SAP’s Business Flash newsletter just popped into my in-box. Under the email’s catchy headline “Companies That Run SAP Have 32% More High Fives At Their Staff Meetings” runs this sentence: “A recent study of companies listed on NASDAQ and NYSE found that companies that run SAP are 32% more profitable than those that don’t.” At the end of the sentence is an asterisk that leads to a footnote: “Based on a 2005 Stratascope Inc. analysis of publicly available fiscal results of all non-financial companies listed on NASDAQ and NYSE.” OK, I’m intrigued. A broad study that links a particular corporate software program to vastly outsized profits is interesting. I want to learn more.
So I click on a link in the email that says “We invite you to see for yourself,” figuring it will bring me to a copy of the study, or at least to some details on the research. Wrong. The link brings me to a marketing page on the SAP site filled with the usual slogans, like “enable business flexibility.” The only information on the study is this: “Companies that run SAP are 32% more profitable, according to results from a 2005 Stratascope Inc. study, which analyzed publicly available financial results of NASDAQ and NYSE companies. The study also found that these companies delivered 28% more return on capital. Clearly, SAP customers have a strong track record of outperforming their peers.”
Clearly? Seems pretty opaque to me. I mean, where’s the data?
Not to be put off, I do some searching, assuming that the details of the study have been published somewhere. Nope. I can’t find any trace of this research on the web. I do, though, find the home page of Stratascope, the company that did the research. Its business consists mainly, it seems, of providing IT sales forces with financial data on public companies. On every page of its site is a large promotional advertisement highlighting some of its key clients, one of which is SAP. Hmm. I also find that the chairman and president of Stratascope, Juergen Kuebler, “was employed at SAP AG for 9 years where he was responsible for the sales launch of the product ‘R/3 on AS/400’ as well as the sales training of the complete staff at SAP AG.” Now, the fact that SAP and Stratascope are cozy – and that it’s in Stratascope’s interest to make its client happy – doesn’t mean that Stratascope’s research is necessarily unsound. But it does raise questions – questions that can only be answered through a careful review of the research methodology and results. A review rendered impossible by the fact that neither SAP nor Stratascope is revealing details about the research.
This isn’t an isolated problem. IT companies are always throwing around seemingly precise statistics claiming to show that their hardware or software is associated with competitive advantage or superior financial results. As far as I’ve been able to discover, the research is almost always dubious. Either the methodology is flawed (tiny or biased samples), or the research is carried out by the company itself or some sycophantic supplier. And rarely are the full details of the study divulged. IT buyers shouldn’t pay any attention to such faux statistics. If a vendor dresses up its marketing slogans with research results, then it should show us the data – all of the data.
Hi,
It is fun to see how companies are selling service oriented architecture.
“Seamless Integration” say the websites.
{Wonder if the powerpoint presentation of the salesman is seamless!}
“Business driving technology” say the others
Check the worldwide web for companies doing SOA and it is very difficult to find one good piece on SOA minus the jargon.
Companies that are not having a service concept are just building a layer around existing apps making an abstraction and claiming it is SOA.
Only 10% of the functionality of enteprise apps is of any real value to the customer and the customers are paying for most of what they do not use.
The big software firms are selling everything based on cheap marketing. See how companies are making money out of Sarbanes – OXley act – an act for compliance.
This is how it is being sold:
“Sarbanes Oxley is not about compliance. It is an opportunity to integrate your processes and make them more efficient.”> Their claim is that by rearchitecting existing apps to make it easily auditable they are adding value to companies.
The whole IT marketing is a fraud. People who do not know technology are selling it using all jargon – most probably they are management grads.
The guys buying it are non IT firms (say retail, oil&gas) etc and these are also management grads.
So like all management grads, there is more of ‘jargon’ and less of ‘stuff’.
Regards
KIRAN R
Interesting. How about other software vendors? And are there solid figures that any IT product matters to lasting competitive advantage? This blog posting leaves me hungry for more.
It’s a constant nowadays. The Great Lying.
You have your obfuscation, your outright lying, your subtle hiding of facts, your muddying of the waters, your fog of hype, your complexity of data, your artful dodging.
The default state is lying. It’s good that you’re calling people on it. More should be doing it. Too often the trade press just passes off company PRs as articles. This sad state of affairs means that there is no trust. And with no trust, there is great friction and delay in the purchasing process. So, in the end, they hurt themselves.
Good.
Filip,
The best one I used to hear is from i2’s Sidhu saying his company already created 30B value for its customers and want to achieve USD 100B value soon!
SAP’s Bait and Switch
On his blog Nicholas Carr talks about a bait and switch conducted by SAP during a newsletter he recieved. The newsletter makes some impressive claims but then didn’t deliver the goods upon his further investigation. Its a classic …
Statistics for Dummies
Interesting. Assuming that people who buy any Software or Hardware are capable (can question and dig deep into the research facts), have multi-million dollar budgets, and consider IT to be a strategic investment (not like ordering supplies for offic…
Remember the whole Y2K thing ? The World was going to end.
Banks HAD to buy billions of dollars of services by Government edict. Any software is only as good as the personell applying (using it) !
Kiran,
I can understand your frustration.
That could be one more reason (of many) why Japanese companies are beating US firms in terms of productivity, profitability…with less IT expenditure.
Juergen also worked at JD Edwards (now part of Oracle) for a while around 2000, with another ex-SAP colleague, Jim Maikranz, focusing on sales methodologies.
In those days they another company for the stats, Finlistics.
After a while, both left JDE and set themselves up. I presume that is how Stratascope started.
SAP’s Ad Campaign – Credible? Meaningful?
SAP has been running a major ad campaign with the basic message: “Companies that run SAP are 32% more profitable than those that don’t.” Nicholas Carr has posted his skeptical comments here. I, too, attempted to learn more about the d…
It is interesting that Mr. Carr, in his detailed research for this article, never contacted us at Stratascope Inc. The study was commissioned by SAP so it will not be published on our website. SAP owns the study. I would be more than happy to explain our methodology and calculations, as well as our auditing and quality assurance procedures that we use whenever we undertake such a study for any of our clients. All Mr. Carr had to do was ask.
I can also tell you that SAP commissioned the study without any idea what the results would show. The Ad campaign was created as a result of the study and not the other way around.
We also need to understand a little about statistics. Hypothetically, if the average non-SAP client in the study was showing a profit margin of 6%, a 32% higher margin would be only 7.92%. The numbers are not so hard to imagine in this light.
Finally, it is also clear that this is a success by association Ad campaign. There are no claims in any aspect of the campaign that imply that the client’s success is because of SAP.