% fortune -ae paul murphy

Sapped to the max: non partisan research

I'm somewhat embarrased to admit this, but we haven't actually cancelled our subscription to The Economist despite their anti-Unix, anti-change, and anti-American biases - mainly because my wife agrees with their politics and they're generally at least literate in their wrongness.

That said, an Oracle ad on the back cover of the June 23rd issue really caught my eye. According to the ad, some outfit called Nucleus Research had investigated SAP's advertised claim that companies using SAP are, on average, 32% more profitable than their non SAP using competitors only to find them, in truth, an average of 20% less profitable.

And if that wasn't enough, the ad then implies that a second study found Oracle's own customers to be, on average, 40% more profitable than their competitors.

That second claim isn't supported by references to any actual analysis that you and I can go out and review - the smaller print only says that the data used has been validated by somebody called "Mainstay Partners." In other words, this claim is almost certainly complete rubbish.

The Nucleus Research analysis, in contrast, exists and is easily downloadable.

It's a little masterpiece - two pages of conclusions, two pages of supporting data; and the numbers work: it's bottom line truth that the 81 public companies SAP mentioned as customers when Nucleus did its work were 20% or so less profitable than the average among competitors SAP didn't mention.

Beautiful - wrong, of course, because it's like studying the sun through a blue filter and concluding that it only puts out blue light - but a lovely piece of work nevertheless.

And yet, you can learn a lot about the sun by looking at light in the 4500 Angstrom range and the Nucleus data does suggest there's something different about the SAP customer base. Look at the list of companies and the SAP modules they use as provided in the Nucleus report, for example, and it's immediately obvious that the biggest losers listed have two things in common besides their use of SAP: first a best of breed applications strategy and secondly the kind of strong relationships with IBM or Microsoft that get the IT director quoted, frequently and approvingly, in Computerworld.

In other words the use of SAP is more likely to be sypmtomatic than causal with respect to within-industry relative profitability.

But what about the other side of this, SAP's 32% claim? Here's a bit from their customer success stories page that happens to mention the magic number:

AMD: Using mySAP CRM to transform key service processes to be more customer-focused, not only is AMD improving its customers' service experience -- but the company is expecting to capture a 32% IRR through 2010

That's 32% on the project investment, not AMD shareholder equity - and the numbers are from the project justification, not experience.

All of which raises a question: these ads cost about $120,000 a shot just for North American coverage, so who are the mental midgets SAP and Oracle think dumb enough to be influenced by such obvious garbage? Well, here's what the Economist says about its audience:

The Economist is written for a global audience of senior business, political and financial decision-makers that value The Economist for the accuracy of its incisive writing, its international outlook and lack of partisanship.

Hugely influential, The Economist's readership has grown to almost four million and includes many impressive names from among the world's opinion leaders.

I just about did a spitter on reading that, I mean "Accuracy?" not hardly, and "lack of partisanship"? this from a magazine that trumpeted "One Down, Three to Go" on its cover when Spain's electorate caved to terrorism?

I don't think so, but superficiality of the lie's appeal to the like minded is certainly consistent with the Oracle and SAP ads, thereby suggesting that the audience for them isn't the people who read the magazine, but the people who buy and sell advertising space in the magazine - and that's something both Oracle and SAP should think about before buying another page.

Paul Murphy wrote and published The Unix Guide to Defenestration. Murphy is a 25-year veteran of the I.T. consulting industry, specializing in Unix and Unix-related management issues.