Further info and resources from my website

Thursday, November 17, 2016

Viadeo's demise: Chronicle of a death foretold

LONDON
In a  recent op-ed on the current French president's disastrous term and abysmal approval ratings (4%, if you can believe it), the New York Times refers to the hapless François Hollande as the living dead: who continues to be politically alive although he has actually died. The same can be said of another French institution, this time in the technology space: business social media Viadeo which had aimed at revolutionizing many aspects of HR.

For most global users of professional social media, there seems to be only one name: LinkedIn (although Facebook is bound to become a formidable competitor as it announced this week it was entering the job postings business.) But in many countries there are local players that cater to the requirements of a niche market. Xing is popular in German-speaking countries, Weibo in China and, for a while, French-based Viadeo looked promising. Unfortunately for  the latter, who was created in 2005, the same year as Workday, its trajectory has been the exact opposite of the HR-cum-finance SaaS vendor: whereas the Pleasanton-based company has gone from strength to strength,  the Paris-based company has seen its prospects get dimmer and dimmer, especially in the past few years to the point that last week it requested to be de-listed in an attempt to stop its stock price's free fall.

Sad as it may be, this has come to no surprise to me. For quite a while now I have been advising investors to stay clear of this stock. Several of those who followed my advice sent me last week email messages telling me my advisory fee was money well spent, while others may rue the day they decided to take the risk.

So, what went wrong with Viadeo? Why couldn't it follow in the footsteps of highly successful French unicorns such as Criteo (Disclosure: a former HRIS client) and Blablacar? The reason can be found in several mistakes Viadeo made.

First, it never managed to provide the depth of functionality that LinkedIn does. Viadeo was for a while not more more than an online Rolodex  with basic messaging and job features. And it had the gall to try and charge you when LinkedIn would get get you like-for-like features for free.

Second and worse, although the two  companies were established within a couple of years from each other, Viadeo thought LinkedIn would remain US-centric and that Viadeo could be its European version and even compete globally. Unfortunately most initial Viadeo users, including yours truly, quickly realized that the same people who were on Viadeo were also on LinkedIn. So why duplicate the effort?  A choice had to be made. If you work in international settings many of your contacts will be  on LinkedIn only, That simple observation signed the death knell for Viadeo in my opinion. I left it and never looked back.
The giant and the dwarf


Early this year I conducted a workshop for the localization of a global HRIS with a client based in France and when discussing employee records and associated data, somebody mentioned Viadeo as a social media that maybe should be tracked because many employees are typically French and use it to the exclusion of others. However, they couldn't give me an exact figure on how many users were exclusive Viadeo users. Knowing that most global HRIS vendors wouldn't have Viadeo as part of their standard offering I was reluctant to include it. But, at the same time, I didn't want to ignore what could be a legitimate request. So, I took a quick poll around the room. The 35 people in the workshop were all French, based in France, belonged to the various group entities. "How many have a Viadeo account?", I asked. Only two raised their hands,and one then added, 'But I haven't updated mine in years." "How many have a LinkedIn account?" All raised their hands. That sealed the fate of having Viadeo in the French localization of the global HRIS project.

Third, LinkedIn became global so much faster and signed up so many users that Viadeo soon faced the network issue that any competitor of a social media is well aware of: if everybody is on LinkedIn, why bother  about Viadeo?

Tongue tied
Viadeo could then have positioned itself with brilliant functionality (which it doesn't have - I did an in-depth analysis for my investor clients: it can at best be described as adequate). And God knows that the heavy user of LinkedIn I am (especially in the HR Technology Group discussions) can point to many shortcomings of LinkedIn that Viadeo could have capitalized on by bringing better features. But it seems that Viadeo has no sense of what competitive intelligence is.

Viadeo could then have tried to expand in some large markets outside the US to become a credible alternative to LinkedIn. Here again, total failure. To mention just two BRICS countries, it had to pull out of China ignominiously and, as for Brazil, its branding was a total disaster. Couldn't all the money they raised from investors be used on some marketing studies that would have told them that Viadeo sounds in Brazilian Portuguese like the  local word for "faggot" and that few, if any, Brazilian professionals would boast of being on "Viado"?

The business model between the various professional social media is also revealing: LinkedIn relies more on advertising, whereas Viadeo has a complex subscription model. Now, who in their right mind would pay, even if a few dollars, for what can be found largely for free and better somewhere else?

In 2013, less than a decade after it was established, Viadeo was surpassed on its own turf by LinkedIn. Instead of being a wake-up call to its management, they continued with their usual mix of hubris, delusion and denial, dreaming that Viadeo could oppose the laws of gravity until Doomsday. Well, Doomsday has arrived.

Put all of this together and you quickly realize that investing funds in Viadeo was throwing good money after bad, and for a company or a professional user, a complete waste of time. One more technology company to go join My Space, Netscape, Orkut* and soon Yahoo in the cemetery of deluded, badly managed, acquired or failed software/internet companies.
Sic transit gloria mundi


*Just a few years ago, Orkut was all the rage in Brazil before everybody migrated to Facebook. Many people don't even remember it once existed

NOTE: Although the analysis in this post shares some of the findings presented to investor clients, it remains the intellectual property of Ahmed Limam and as such cannot be reproduced in any form without  his written permission)

(The blogger/consultant/advisor is currently attending Cornerstone Convergence 2016 in London)





Friday, July 22, 2016

Middle Kingdom: Musings on Chinese HR, technology and the country

SHANGHAI
The Oriental Pearl Tower  seen from the Bund.
As spectacular as un-Chinese since, unlike Muslim
minarets and Gothic cathedrals, Chinese palaces, pagodas
and pavilions have traditionally been low-rise affairs
Surprising as it may seem for the globe-trotter I am, until this week I had never set foot in China. Although I had worked on many global projects which involved rolling out an HR system for a Chinese workforce the opportunity never arose for me to visit the ancient land known to Marco Polo as Cathay* (the name is still used by one of the most successful airlines in the world, based out of Hong Kong.)

It was therefore with great trepidation that I boarded the world's largest aircraft, the Airbus A380, for the longest trip east that I had ever taken in order to spend most of the week in Shanghai with the local subsidiary of a multinational client. This was a unique opportunity to gather business requirements face to face with HR users in their local environment, something only imperfectly done in virtual meetings, on the phone or by email.

You soon realize that if in China rules and laws may not be voted on by a democratically elected parliament, but rather handed down by the omnipotent Communist Party, they are adhered to ferociously, as I was reminded when, during one of the workshops I led, I suggested we shorten the lunch break from one hour to 45 minutes. The reaction was a categorical NO. Labor laws are labor laws: one hour's break for lunch is one hour. Can't say I was shocked since that is exactly the same rule as in France (but outside the rest period, the Chinese workforce is a hard working one and I was impressed by the quality and dedication they bring to the task.) Actually, many other aspects of China's labor laws seem to be directly inspired from France's: such as the 1-2% of a company's payroll which must be set aside for the worker union to spend on employee benefits. But then French laws are at times very socialistic, if not outright Communist (ever wondered why the Labor Code in France is a little red book?)

Replica of Xi'an Terracotta Army
soldier, gifted to the blogger
by the Chinese delegation to the
UN World Tourism Organization where
he worked in the 1990s


A rapidly changing country
As everybody knows, China has managed to bring hundreds of millions of people into middle-class wealth faster than any other country on earth: in the past 25 years income per person has risen 13 times, whereas in the rest of the world the figure is barely 3 times. I see on Shanghai overcrowded roads more SUVs  than anywhere else but the US. Beijing has more billionaires than New York.  If there ever was a national success story it is China. And yet serious problems are looming: it is still an autocratic country, unemployment is rising, especially in the poorer rural areas in the country's western half, inflation is high (Shanghai home prices rose by 20% last year), the population is greying fast as a result of the one-child policy aiming at reining in demographic pressure, pollution shows its ugly face in many places with foul air a constant irritant. Some un-Chinese traits such as individualism and Western-style consumerism are on the rise in this increasingly unequal People's Republic. (I always marvel at Chinese tourists who buy designer bags at Paris upscale department stores for a price that is higher than many workers back home make in a year)

Now, to the topic at hand, requirements to manage a Chinese workforce as part of a global HRIS. In some aspects HR law and  practice in China may be complex, even cumbersome (but is there a place  where that is not the case?) However, in many other aspects it is quite simple and even free-market based, reminiscent of the practice in the (income-tax free) Persian Gulf states. For instance, in Europe and America, there is a quite clear-cut distinction between permanent employees and contractors, HR processes apply fully to the first, not to the second. In China, there are no contractors: everybody is a permanent employee. There are also no part-time workers. In other countries, some employees may work only 30% of the normal schedule, and in some cases be paid differently, all depending on labor agreements and regulations. In China, if you're going to work for a company, you work full time. Otherwise, go somewhere else. And no labor agreements either, which makes it much easier to set up compensation plans and eligibility rules
Art Deco glory.
East meets West at the spendid
waterfront neighborhood known
as the Bund

Over lunch, when the Head of HR asked me why there were so many strikes in France (yes, that national trait has made it to the other end of the world) I replied, "For the usual reason: to get more money." She looked very surprised: "Really? But if they want more money and they are not getting it from their current employer, why don't they just move to another better-paying company?" Admirable logic, which makes sense in a fast-growing, emerging market like China, but, alas, does not apply in sclerotic European countries like France.

Language-wise (you may want to brush up on my 5 pillars of "glocalization") if you're going to roll out a global HRIS in China, make sure all self service features are available in Mandarin. Otherwise, the system won't be used. Many HR power users, even if working for a multinational company, will struggle with English, so having the whole system in Mandarin is a must.

Workflows with different levels of approvals is also a must-have in a country where deference to senior management is part and parcel of the culture. Electronic notifications have made great progress in the Middle Kingdom but some document still need to be printed out for signature and be handed out to the relevant recipient. If you ever wondered why China is referred to as the Middle Kingdom it's simply the name in Chinese: The first character for the name is a horizontal rectangle cut in half by a vertical stroke, meaning, you've guessed, Middle. Like all great societies, China sees itself as the center of the universe. Can't blame them; after all, they are the most populous nation on earth, soon to be the richest, and the one with the longest continuous civilization in the world.

It's all about Human Resources


HR rules and HR Departments are nothing new in this country. The US only got its Civil Service with its grades and steps and examinations at the end of the 19th century, but the Chinese Ming dynasty, which ruled the country until 1644, already had a Department of Personnel with a nine-grade bureaucracy and legendary examinations one had to sit for and pass before being entitled to a position. Modern China is simply the heir to a long, centuries-old  tradition.

Among the various HR domains and processes, time recording can be quite complex in many Chinese companies, especially manufacturing now that China has become the world's factory. However, soaring taxes, transportation and energy costs means that China's labor force is no longer as cheap as it was. China will increasingly have to move up the value chain, which explains the strong emphasis on training, competencies, learning and development, and executive assessment. Again, nothing surprising in this ancient Confucian culture where learning values  are rated very high.
The blogger ready to board the Shanghai
MagLev Train. At an average speed of 300 km/186 m
per hour, with a peak speed of 430 km/237 m per hour,
it is the world's fastest train.  It is also the only one that runs on
magnetic-levitation technology.  Whether it is profitable
remains to be seen as it is pricey and covers a short distance
(in a highly congested area, though)

Payroll, is of course, highly regulated like everywhere else, but China is far from being the worst offenders. And there are limits to nannying employees: for instance, salary advances, which in some countries are mandatory if requested by the employee, simply don't exist in China You are paid for the work done, not the promise of it. For any help, go to your family, is the message in a culture where family bonds are stronger than in the West, but weaker than in Mao's times (In China people don't resort to banks for their savings needs but rather to the family or peer-to-peer networks.)

Absence management is also complex, and China is rather unique in that it distinguishes between absence types mandated by law and  those awarded by a company as a benefit for a differentiated treatment. The former  have to be taken during the take period, and if the employee leaves before its end they are compensated; whereas the latter, if not taken, are lost and are not compensated. And just as part-time employees are unusual, taking an unpaid leave or a sabbatical is unheard of for most people. Note the existence of many recruiting and training agencies (such as Zhaopin or 51job.)

Benefits involve many players: government, worker union and employer. Noteworthy that if some benefits (such as birthday allowance) are not provided by the worker union then the employer will play the substitute role and provide them.

In a  country where education has long been seen as a passport  to success, small wonder that competency frameworks, training agencies and learning models are all the rage. Many companies would finance employee degrees in exchange for a guaranteed stay with the company (similar to tuition reimbursement by US companies.) For some useful training (such as languages), private enrollment would also be refunded by the employer if the employee brings evidence of the certification thus earned.


China's HRIS vendors hold their own
To meet the HRIS needs of Chinese companies, whether domestic or subsidiaries of multinationals, the array of providers is quite large. SAP's market share is largely around its on-premise offering, and Oracle's is based on PeopleSoft. Cloud vendors are represented by Workday, a distant third but growing fastest. Kronos is well-entrenched when it comes to time management. Unsurprisingly for such a highly patriotic, even nationalistic, country, Chinese vendors have, together, a majority market share. They include household names in China such as Beisen, the undisputed talent company, and other vendors such as Neusoft (or even micro-blogging firm Weibo) covering various HR processes, when not the whole gamut of functions.



The biggest challenge facing homegrown vendors is how to go global, not an easy task when some tools which we take for granted are not available in China. First-come visitors to China may be surprised, even shocked, to find that social media and internet tools like Facebook and Google are banned (unless you, or your company, are lucky to have your own VPN.) In the West, and even the rest of the world, so much HR work, actually so much business work, involves using these platforms that you may be thrown offbalance when you realize you cannot keep up with your friends (on Facebook), get your email (on Gmail), check a video on YouTube, or plan an itinerary on Google Maps. Surprisingly and erratically WhatsApp, despite being a Facebook product, is allowed to operate in China. The Chinese make do with local variants such as Baidu, Weibo or WeChat (which is integrated with LinkedIn.).

The Chinese are a justifiably proud nation, but also a pragmatic one. They will find ways to live up to their full potential and be a full member of the global business community, something they've longed for and craved for a long time.Needless to say that this post only covers the People's Republic of China (PRC) aka Mainland China. Taiwan, Hong Kong and Macao are completely different in terms of context, HR maturity and vendor landscape. In due course they will warrant their own blog post.

(The blogger is currently crisscrossing the globe gathering requirements for a multinational company. Next stop: Detroit, USA.)

(This is the latest in a series of wide-ranging articles focusing on a single country. Previous posts:

August 2011: Brazil Rising: Thoughts on HR, technology and an emerging giant 
December 2012: My 20-Year Affair with Spain  - with more than 9,000 views it is one of my most popular blog posts
June 2013: Thoughts on India, its HR/technology space
Nov. 2014: Of Switzerland, the country, its HR practice and technology landscape)

NOTE: All photos are the work of the blogger and copyright applies
From the blogger's library

*I strongly recommend Gary Jennings' superb novel, The Journeyer, about the great man's 13th- century travels throughout a China few  people had ever seen then. 1,000 pages which you can't put down until you reach the end. For anybody wanting to understand China's wrenching changes in a historical perspective, Jonathan Spence's In Search of Modern China is a must-read. Nobel-Prize winner Pearl Buck's novels, set in pre-Communist post-Imperial China,  have a lot to say about the Chinese soul and experience. The movie buff I am relishes Zhang Yimou's movies (especially when the incomparable Gong Li is in them): Raise the Red Lantern, Ju Dou, Red Sorghum and Flying Daggers are favorites. He is also the man behind the highly acclaimed opening and closing ceremonies at Beijing's 2008 Olympics. 

Tuesday, April 19, 2016

SOW - A Comparison of 3 Global Cloud HR vendors: SAP, Oracle and Workday

GENEVA & NEW YORK
The leader, the follower and the laggard
I have been asked for a while to share my system-evaluation and -implementation experience with the community and my readership by comparing the three most frequently shortlisted cloud HR systems: SAP (SuccessFactors), Oracle (Fusion) and Workday. I will from now on refer to them as SOW, to be pronounced either to rhyme with "low" (as in "low adoption") or to sound like a female pig since some of these vendors' features are no better than lipstick on a pig. *

Of apples and oranges
Although there are more than three cloud-based HR vendors, the reason I am limiting myself to the SOW usual suspects is because they are the only ones with a global reach to meet the complex requirements of multinational companies. Despite attempts to the contrary, Ultimate is still a US vendor, Meta4 has all but disappeared, HR Access has been folded into Sopra and Cornerstone has yet to make up its mind whether to develop a full-fledged HR Admin module - and without an HR system of record you cannot have a global HRIS worth its salt. ADP is mainly a payroll outsourcer with multiple products (some in the cloud and covering various HR processes) but not a global HR system of record. Infor has yet to rationalize its product offering à la Fusion and its Lawson offering was never a truly global HRIS. And some of these vendors' "cloud" offerings are really nothing more than a quick repackaging of their old hosting business. So, here we are, stuck with SOW.

This being said, it is worth remembering that to a large extent  we are comparing apples and oranges since there are such key differences between these vendors that some evaluation exercises can turn to the surreal. Oracle, for instance, is mainly a database vendor with a strong anti-cloud history and a PeopleSoft legacy customer base which has yet to endorse Oracle Fusion. SAP, which comes from the application world, has therefore more serious credentials, reinforced by its continuing investment in the SuccessFactors platform. Its main issue is that, in addition to some questionable product decisions, it has yet to articulate a cogent cloud-based ERP strategy.  This is the main reason why I refer to Oracle and SAP (along with some others) as dinosaurs in a popular blog post. Workday, on the other hand, is of course a native cloud vendor which has quickly shot to the top of the league table with an offering, business culture and service quality that the other dinosaurs can only dream of emulating. Yet, Workday is far from perfect and also has some serious issues.

SaaS and cloud
Some companies may not care about the differences between SaaS and cloud, some may even be ignorant of them, but it is good to remind my readership of the meaning of these  two concepts which are often and wrongly used interchangeably. SaaS is the most advanced form of the cloud where all parts of an offering (hardware, database, software) come from a  single vendor. All you the customer need to provide is a browser-toting device (desktop/tablet/smartphone) and you're in business. Workday is thus a true SaaS vendor. SuccessFactors, whose offering relies on some on-premise legacy features which are hosted, is getting there but cannot be considered 100% SaaS. As for Oracle, who first developed its Fusion product as  an on-premise solution, and can deliver it as a hosted system, it is therefore in the cloud but of course not SaaS. So remember this key differentiator: All SaaS systems are by definition cloud-based, but the reverse is not true.


Stats wars
As the community knows, I have zero tolerance for fanciful figures, especially around customer numbers. Some of the fairy tales I hear are so absurd that I am unsure whether to laugh or sob when I hear them. The below scorecards provide a reasonable count of LIVE customers as per each cloud system. If the customer is still on PeopleSoft for HR Admin and has interfaced it to Taleo or some Fusion talent modules, Oracle will refer to this misleadingly as Cloud HCM. I don't. Same thing for SAP: If Employee Central is not implemented, then I do not count SuccessFactors as a reference - it is only a talent project, not a global HR one. Workday is easier since, by definition, their system cannot run without core HR as a foundation (although some customers use a light HR version to start with talent processes such as performance.)

Integrated/interfaced/unified/organic etc.
After phony customer count figures, the biggest source of BS that comes from vendors has to do with how well integrated the offering is. Here misinformation is rife, with Oracle the undisputed leader. Fusion, which can come in different flavors as mentioned earlier (public cloud, private cloud, on-premise - see below) does not necessarily cover all HR processes and most customers prefer to hang on to the legacy core HR. Talent features can come from either Fusion or Taleo. And within Taleo remember that the Learn.com product was built on .NET technology whereas Taleo was built on Java.

SAP SuccessFactors at least developed Employee Central on its own technology stack; however Plateau was not a 100% SaaS offering, and Concur and Fieldglass are based on other technologies. The other SF modules are also on different technologies which means a customer running the whole suite will have different code bases AND versions. (And as for Multiposting, well, nobody knows when/if it will be integrated in SF/EC.) Not pretty, and not full SaaS. And, of course, Employee Central Payroll is anything but an Employee Central payroll.

Workday, on the other hand, as befits a product developed from scratch and organically, has the cleanest data model with all HR processes now available, except Learning. Payroll is largely work in progress, with the last two countries released (UK, France) yet to go live with a customer. I still have my doubts as to the ability of a single global SaaS payroll vendor to deliver the goods in an efficient manner.
I can already hear some jump and say, "Hold on a second. Workday, too, has integrated third-party technologies after acquiring Cape Clear and Identified." Most true, but there is a fundamental difference when you integrate a third-party product as part of your underlying technology and when you do it to cover a specific HR domain. With the latter you find yourself with a different look and feel, different workflows, a different data model. Any HR user who had to struggle with different products would tell you what a nightmare it is.

3 -VENDOR ANALYSIS: COMPANY COMPARISON


Oracle Fusion has come a long way from an on-premise, complex-to-implement, functionally limited product with an ugly look and feel (those overloaded screens with horrid blue!), to one that can be deployed in the cloud. To get a sense of Fusion's background, refer to my post "Error 404: Oracle Fusion not found".) Since then, it has made progress (especially on the  UI front when it moved from FusionFX to Skyros), but its two other competitors, both cloud natives, have moved faster and often better. Oracle still misses many key HR domains (see the product scorecard below) and its vision and roadmap at best are fuzzy, at worse don't make any sense: Why waste its time developing unneeded products such as Employee Wellness, Reputation Management, My Volunteering or low-priority ones such as HR Help Desk, and still miss, Tier-1 country localizations or Recruitment on the Fusion platform? The co-existence or hybrid approach is not a meaningful differentiator, but actually a sign of weakness: Missing key bits, Oracle tends to lump everything together and it's up to the customer to make sense of what is what and how to integrate it, not an easy task when Oracle is still not very forthcoming when it comes to its offering, as explained below.

Public Cloud, Private Cloud, and Cloud ServicesThe Taleo product line is a case in point: Officially rebranded as Oracle Talent Cloud (but on their website still referred to as Oracle Taleo Cloud) it is supposed to be the Recruiting offering to be interfaced to Fusion Core HR. However, the overlap issues (Fusion Performance vs Taleo Performance, say, or Fusion Compensation vs Taleo Compensation) has yet to be resolved. Ask the question and  you'll get a mumble from poor sales executives who are none the wiser. Note that Taleo is a hodgepodge of various acquisitions itself: Learn.com (with its scaling issues), Jobpartners, Recruitforce and Vurv, and Wordwide Compensation. (Not to mention that there are two Taleo flavors that go by the Enterprise and Business monikers)Talking about Compensation I find it a pity that Fusion does not allow user-defined logic to go into compensation elements, for instance to add a regional rate to a pay rate and calculate an employee's compensation on that basis.
Fusion, born as an on-premise product, can be hosted in a private cloud (customer's own environment) or shared (public cloud) with different deployment implications.
As if  the (con)Fusion was not enough, you have PeopleSoft Cloud Service which is as far from a SaaS offering as St Petersburg, Florida is from St Petersburg, Russia.
Then there is a host of other products such as Right Now Policy Automation (benefit eligibility), another acquisition, which Oracle throws at befuddled customers.
Making sense of Oracle's offering is clearly not for the faint-hearted.

Great products are built by great people. The converse is also true: Mediocre people build mediocre products. Oracle, with its stifling bureaucracy and awful management, has problems attracting and retaining quality people, especially in the HCM ¨product line. Add to that the fact that in Oracle's highly political culture the technology side has always had the upper hand versus product, and that HCM has always been the Cinderella application, only getting attention when a top leader emerges (first PeopleSoft, and now Workday.) This explains why the company never features in Great Places To Work league tables and has suffered from a steady hemorrhage of its best and brightest from PeopleSoft who have been poached from Workday, leaving a lot of deadwood behind.

An even bigger biggest issue with Oracle is how it (mis)treats its long-suffering customers. Just this week, an old customer, the  French Civil Aviation Authority, who has had enough of Oracle's abusive licensing and audit practices, decided to discontinue the use of all Oracle products. Last year, two other French companies, Carrefour and AFPA, went to court over the same issues and won. In 2014, a survey by the Campaign for Clear Licensing of 100 global Oracle customers found that 92% of them were deeply unhappy with the vendor. In the US, none other than the federal government decided in 2012 to ban Oracle from bidding for its business due to the vendor's questionable sales practices. Well, you get the idea. Unless you evince a particularly strong masochistic streak, selecting Oracle often  means tough times ahead.

On the technology front, Fusion, contrary to the vendor's spin, is not a "fusion" of its portfolio applications, but neither is it exclusively based on its unpopular EBS product line even if it borrows many features from it such as FastFormulas and Flexfields - the latter permeates Fusion even more than with EBS thus allowing good customization possibilities. However, Forms have mercifully been retired in favor of more modern Java and SOA-based technology. Outbound integration is a big headache as is data migration, even from Oracle's legacy systems. It is noteworthy that if many Oracle customers prefer to implement Fusion in the cloud rather than on-premise it is (in addition to the natural preference for the cloud), because, first, the HR Admin part has yet to reach functional parity with PeopleSoft (or Workday) and, second, the technical complexity of doing so is not to be ignored (just the sizing requirements would discourage the best-intentioned customer.)

Although initial pricing can be quite seductive (Oracle heavily discounts Fusion in order to drive up customer adoption, or offers a credit to swap on-premise applications for cloud-based Fusion), the vendor's customer-relations record, as mentioned earlier, is far from reassuring. Also, if you are an-on premise customer and are renewing/extending your license, Oracle will throw a cloud subscription at you included in the package. You might as well take it, even if you are unsure whether you'll actually move to the cloud.

In summary, customers  who already run an Oracle HR application (PeopleSoft, EBS, JDE), have a good rapport with the vendor (admittedly a rare occurrence), negotiate a financially interesting migration, do not need cutting-edge technology or terrific look and feel, and don't mind not being pampered or the complex integration behind products that come from disparate technological stacks, can look at Fusion seriously, especially when taking into account a strong point: its reversibility. Surprising as it may sound, there are still companies out there that are wary of the cloud (after the NSA snooping scandal and the current legal tug-of-war between US authorities and Apple and Microsoft you can't really blame them): With Oracle you can bring your HR system within your corporate firewall without having to switch systems and go through another complex implementation. This advantage comes at a hefty price, though: no single code line for all customers since, depending on what flavor of Fusion customers have, they can stay on their version much longer than public cloud customers. There are therefore multiple versions of Fusion at any given time, which increases the cost of running the product. And, as we all know, the customer always ends up bearing the costs. And if you are a customer who is still on the old look and feel, moving to the new one is not a straightforward process.



The world's largest business-software vendor, and the one with the most localized payrolls, took a leaf from its nemesis Oracle when it went down the acquisition road by acquiring SuccessFactors (SF). However, as I explained in detail in my blog post on their strategy just after the transaction was announced, SAP differs markedly from Oracle: Rather than build from scratch a product for the cloud, in which neither had any experience, SAP decided to continue investing in the SF platform by beefing up its Core HR/HR Admin product a.k.a. Employee Central (EC). Although the latter has grown significantly since its earlier releases, it has yet to catch up to the group's leader, Workday.

One increasingly important strong point of SF is that it belongs to a European vendor. With all the data-privacy issues raised by NSA snooping, many companies (especially European ones) are loath to go with a US-based vendor with a loss-of-data Sword of Damocles hanging over them.

Three weaknesses from SAP SF have yet to be solved:

-SF is still missing a payroll module based on its own platform, and the misleading Employee Central Payroll (in reality a hosted SAP Payroll) is no substitute for a truly integrated offering. SAP brought us the largest number of localized payrolls on earth; Why can't it use that expertise to enhance SF and make it a truly global and comprehensive HR offering? No full-fledged global HR system has come to market without its own payroll, so the jury is still out on whether SAP can be the exception that proves the rule.

- The multiple code lines and releases that make up the SF platform need to converge on a single code line and release based on EC. It is bad product design and worse customer support not to inform a customer that they are not enjoying a critical feature because they are on a older release  as happens with many customers. (Workday would never allow that to happen if only because the window customers have to move from one release to another is expressed in weeks, not months or years as is the case with SAP or Oracle.)

- SAP is also the vendor that brought us the integrated ERP. But it seems that all the strongly vaunted advantages of a single-platform ERP got lost in the move from on-premise to the cloud. All the HANA'ing in the world cannot hide the fact that the company that gave us the on-premise integrated business software is incapable of pulling the same trick in the brave new world of the cloud.

In a recent blog I compared SF's and Workday's pricing so no need for me to repeat myself since that analysis is recent and  therefore up to date. Oracle's talent-retaining issues are not unknown to SAP (I covered it in my recently updated blog post "Could the last executive leaving SAP turn the lights off, please?")

Another issue SAP needs to fix is the implementation methodology. SF came with its own methodology, SAP had another one, and integration partners are at times unaware of which is which. This will hardly help in building confidence in the offering. And the implementation template that SF provides does not list implementation activities in detail so you are often on your own. (Compare that with the fastidiously detailed documents you get from Workday)

Noteworthy is SAP's equivalent to Oracle's co-existence deployment model called here the Talent Hybrid model. The two approaches are not much to write home about since customers have been doing it for a while: Integrating their on-premise HR system of record with cloud-based talent features. Actually, customers started doing it even before SAP and SF found themselves under the same roof.

Who is the most likely customer for SF as a global HRIS? Experience shows that it is mainly SAP's on-premise customers who move to the cloud with it, especially if they are already using SF for their talent needs (in particular Performance or Learning.) However, an increasing number of SAP's on-premise customers include Workday in their cloud evaluation, and a worryingly lengthening list have decided to go with it. SAP, as a vendor, and SF, as a product, need to make themselves more attractive to retain these fickle customers.


3 -VENDOR ANALYSIS: PRODUCT COMPARISON


The HR thought leader and Wall Street darling has revolutionized the HR technology world (that search-based navigation was truly something out of this world when it first came out) and has just passed $1 billion in revenue (in comparison, Oracle's cloud HR business makes up less than 1% of its total revenue.) Workday also has more customers using it as a cloud-based HR system of record than Oracle and SAP  put together. They say that plagiarism is the best form of flattery; considering how many features of Fusion and SuccessFactors were obviously copied from Workday who premiered them, the newest kid on the block still retains its thought leader's crown.

What is attracting the crowds is a native-cloud product, built with consumer-grade usability, a depth of functionality that only those who built PeopleSoft could engineer, a customer focus and engagement that is still unique in the industry. The latter has made the vendor evolve its approach significantly: For instance, from the four releases a year at the beginning to a more manageable two now. Workday has also listened to customers and forsaken its rigidly neutral system-integrator (SI) approach: it will now recommend a specific SI for a specific project, something that was anathema for so long.

All the oohing and aahing about Workday, most of it well deserved, cannot hide that not everything is hunky-dory in the Pleasanton, CA-based HRIS heaven. You can read my Open Letter to Workday's founders for a discussion of these issues. There are still some surprising holes to plug in the offering such as the production of contracts and offer letters or some workflow limitations (despite the fact that their workflow framework is the best of the three.) So far, Payroll has been limited to North America and no date has been set for the release of the Learning piece. The talent features have been improved significantly, in no small measure through the addition  of a Recruitment module (some integration issues with their Core HR need  to be fixed), but Workday has yet to reach functional parity with SuccessFactors in the talent space.

Reporting is undoubtedly one of Workday's strongest suits. For those who use PeopleSoft, it is such a relief not to need to be a PeopleTools expert to write Workday reports. To a large extent you can even say that Workday is a collection of reports since wherever you are in the system you can pull up the relevant reports many of which are "actionable" to use the hackneyed word. But, careful, user-friendliness here is more for the HR team, not occasional users, and it may be better to restrict the creation of reports to a core reporting team rather than jeopardize consistency by having any/everybody duplicating existing reports.

Customization, or lack thereof, is the hallmark of SaaS systems. Unfortunately, in the  real world companies need a certain amount of customization which will not be lost when upgrading. Squaring the circle, you may think.  Workday's custom objects is a move in the right direction, but it has its limitations: There are only so many custom objects you can have, you cannot use them where you see fit and cannot pull them up necessarily where needed. SuccessFactors, with its Metadata Framework-based extensibility approach (especially in Employee Central), does a better job in that respect and so does Oracle (with Flexfields, as mentioned earlier), as befits a product that is available both on-premise and in the cloud.

Workday's greatest success has probably been that a significant segment of their customers comes from companies that either had a Tier-2 vendor or did not have a single, global HR system of record (they used various payrolls and different talent tools.) When these customers finally get their act together, they tend to look at Workday first, rarely at SAP or Oracle. However, cloud-seeking SAP and Oracle customers will almost always evaluate Workday, even if they don’t systematically select it: that does not bode well for the dinosaurs’ cloud future.


3 -VENDOR ANALYSIS: TECHNOLOGY COMPARISON

NOTE ON SCORECARD METHODOLOGY
The grading is based on the many RFPs I have worked on and demos I have attended, along with my own knowledge of these products (derived in no small part from my own use of the systems) and feedback from customers other than the ones I have worked for.
The analysis has been done based on three sets of criteria: Vendor, Product and underlying Technology. Where awarding a grade does not make sense (such as pricing: expensive does not in and of itself mean bad, since often quality comes at a premium) I have left the relevant cells colorless. An explanation of most of the grades can be found throughout this blog post, but I have also mentioned them in the scorecards so that the reader can understand why a vendor is getting a YELLOW rather than an AMBER, for instance.

NOTE ON SOURCES AND COPYRIGHT
All data and graphs are by Ahmed Limam who is hereby asserting his copyright. They can be referred to with proper copyright and authorship acknowledgement.

*Some of the ideas in this post were first presented in an article I wrote for TechTarget in January 2015.

(In addition to the vendor-specific posts I mention throughout this piece, there are many more I wrote in the past few years focusing on a vendor or a particular issue. The most popular ones can be found in the list provided in the top-right corner and automatically updated based on viewer number. For other posts, you'll have to scroll down and search for them one by one). 

Monday, January 11, 2016

Pricing and contracting with your cloud vendor: Tips and tricks

RIO DE JANEIRO

As a new year starts, many of you will be busy working on an RFP for a new HR or ERP system. One aspect that draws little attention from the myriad  reports and posts on system evaluation deals with pricing, contracts and other T&Cs (terms and conditions). This means that because of the inherent knowledge imbalance between vendor and customer, the latter is always the loser as they tend to learn after the fact (the reason for this knowledge imbalance being that vendors respond to RFPs all year long, whereas customers  engage in new RFPs only once in a while, and their procurement departments cannot be expert in all business domains and vendors -especially for smaller-sized companies.)

So, as a New Year's gift to my readers, here are some advice and information which I am sure you will find useful as you negotiate the perilous shoals  of cloud contracting.

No public price list
Unfortunately for user organizations, cloud vendors are playing this game with their cards close to their chest. It is almost impossible for a new customer to find out what is the "true" price of a specific module - "true" meaning how much a comparable company has paid for the honor of becoming a user. Don't expect any customer to share that information freely at Workday Rising, SuccessConnect, Oracle World or Cornerstone Convergence. And as for the vendor, mum's the word. In other words, you're pretty much on your own here.

The basics
A couple of things you need to keep in  mind. 

By now, you must be pretty much aware of the PEPY (Per Employee Per Year)-based subscription model, radically different from the upfront licensing model so prevalent in the Jurassic era of on-premise computing. PEPY means that, for a given module, you will be charged a certain amount X total number of employees. That will be your annual subscription.

Vendors, like cell phone operators of old, will insist on your committing to several years, the minimum contract often being for three years. Of course, you may find yourself deeply unsatisfied with your vendor after a year or two. Too bad; you're stuck with them, and have to wait for the minimum period to end before switching vendors. By then you will have realized  that switching ERP/HR vendors isn't as easy as switching cell phone operator (Do you really want to go through another grueling RFP exercize and even more stressful implementation phase or phases?) So...you are more likely than not to just stick with your vendor. Even more reason to make sure you got the pricing and contract details right upfront.


You may wonder, quite legitimately, "Why should I start paying my subscription fee as soon as the contract is inked when it may be months before my employees can start requesting their leave of absence on the new system or my managers to carry out out their team performance appraisals?" Well, most vendors' response is, somewhat disingenuously, "We're providing you with access to the system, with many standard processes and reports, often with dummy data, our job is therefore done." You will have to be a particularly good negotiator, or quite an important customer whose business the vendor wants, to get them to agree to a billing postponement. Or obtain a discount. 


Plan as much ahead as possible
Speaking of discounts, if there is one rule that is as prevalent in cloud pricing as it was in the olden days of on-premise systems, it is that the more modules you buy, the more interesting ( i.e. the lower) pricing becomes. This means two things.

First, you need to compare what is comparable. In the below table mapping Workday and SuccessFactors to typical HR processes, you will see that every vendor has their own way of arranging HR processes in their offering modules. (I have left Oracle out, since Fusion is priced as both an on-premise offering and as a cloud one.) If you are going to only need HR Admin, Performance and Compensation, you may wonder why you should pay for more. SuccessFactors may appeal to you as a better priced vendor, with Workday as the vendor pushing you to consume more. But, as you grow and decide to automate more processes or  replace other legacy systems, Workday won't charge you more for implementing new processes since these were all included in the core offering.

To each vendor, their world's view


Second, if you have a pretty good sense of your roadmap then include those areas/modules in your planning by ensuring a price lock-in as early as possible. You may not be sure that Employee Central is the right HR system of record for you when you implement the talent modules. But if you wait until the moment you need it, it may be too late (meaning too expensive). Better ensure you already have a price guaranteed in your contract in case you decide to enable it. Be careful about not including it right away: you don't want to start being billed for a feature you will not be using for years (remember that even for the ones you are currently implementing it may be one or two years before you start using them, but you are paying full price from Day 1!) Same thing for geography. If you are going to expand to new territories and some modules are country-specific (Benefits, Payroll) or the employee count increases exponentially, then take that into account and include it in the contract (the more employees you have, the lower the PEPY is). Remember this cardinal rule: it is always better to negotiate free of pressure than under duress.

And in this brave new world of cloud, a subscription comes with a certain number of environments. Make sure not only that you negotiate the right number for the implementation phase, but even more importantly the ones you will need after you go live. You may need a separate environment for training, another reserved for your super users etc. Don't buy more than you really need, but don't be short either.


Price lock and price caps
I already discussed price lock-in which you should have as early as possible (in order to negotiate the best deal), and for as long as possible (in order to postpone billing as late as possible). Another important thing that many customers tend to forget is to demand a price cap. Remember that the agreed upon subscription PEPY is only valid for the duration of the contract. Let's say that you agreed on $50 for a 3-year commitment. Once you've reached the end of that period, the contract is up for renewal and unless  you've thought ahead, your vendor  can demand whatever price increase they feel like: 10%, 20%, 30% and you have no legal/contractual remedy to stop them (except not renewing and looking for another vendor which, for some of the reasons mentioned earlier, is rarely feasible). Better think early about this and ensure your PEPY cannot go beyond the inflation rate and a reasonable percentage.

Working with other lines of  business (LOBs)
Depending on how your company is organized you will have to work with various LOBs: Legal, Procurement, IT are the more likely departments to engage with. Remember that each comes with its own knowledge limitations: even Procurement, which is used to negotiating, may not realize some gems that only you know - some hand-holding may be required. For instance, in order to negotiate a good price lock, you may insist on including Payroll and Recruiting as possible extensions, but only you know that you are unlikely to bring payroll operations back in from your current outsourcing vendor. Use that as a bargaining chip to get a better deal on Recruiting (which you definitely need) and "sacrifice" Payroll which you never intended to implement in the first place (make sure your vendor is not aware of that!) Legal may not understand all the practical aspects hiding in an SLA so be sure to educate them. IT tends to have more experience running projects than HR, so use them for that. They may even have experience with other cloud systems in other non-HR areas, such as Salesforce for CRM, so use some of that experience to drive a good bargain.

What is an employee, anyway?
A source of frustration for some customers is that that the PEPY concept is not as straightforward as it may seem. Some vendors have various categories of employees: full-time employees, part-time, temp, candidates, dependents, retirees etc. Every price for every module will therefore depend on that definition which you may not even agree with. What if your situation changes in mid-year? Will your subscription have to be recalculated? One thing's for sure: your headcount is unlikely to remain the same over your contract's life.


Show your preferred vendor  how little you care for them (yes, I mean it) 
Most of the advice given throughout this post is predicated on your preferred  vendor (usually the one that comes up on top of the vendor ranking at the end of the evaluation exercize) not suspecting that they have "won"...even if they have! This is crucial for various reasons. One, obviously, is that once they know they have won, they will be very reluctant to compromise on some of your requests and you won't be able to wrench any additional advantages from them. Second, and worse, as soon as the other vendors know they have lost (you'll be surprised what a small world the HR/IT industry is), they will stop engaging with you which will soon be reported to your preferred vendor and you lose more negotiation leverage. Third, by negotiating with two vendors in parallel (I don't recommend three) with both thinking they have good chances of winning, you will be amazed at how much lower you can bring the price, and how better terms you can get. Even if, at the end of the game, you still end up with your initial preferred vendor, you will do so in a much better situation - so that second vendor was quite helpful (and in some cases they may even become the preferred vendor in a classic case of the dark horse winning the race.)

Also consider the following
Remember the tip on that module you didn't really need but insisted on as a bargaining chip to get a better deal on the one you're really interested in? You can do that with a lot of other items, such as Premium Customer Service or whatever the vendor calls that platinum card you get by paying more. Insist on it as if the success of your project depends on it and then drop it in exchange for a useful freebie (or a longer price lock period)

If you are based in a country your vendor is keen to enter then you can get a further couple of percentage points of discount. Agree to do testimonials and speak at vendor events in exchange for a further 2 or 3% off.  They want you to be an early adopter? Sure, but then you should demand and get an even more sizable discount.

Always keep an eye on when your vendor's quarter ends. If you are in the home stretch then you will find that your vendor will be particularly open to your "suggestions". Don't hesitate to tell them you're suspending negotiations because of their being "unreasonable". Meet with the other vendor, and make sure your preferred vendor is aware  of that. Stop taking their calls. You will be amazed by what eleventh-hour negotiations can deliver.

Shoot for this...


Finally
Remember that your cloud vendor is also your partner on the journey to a successful new HR system. You will be bedfellows for years. You don't want to antagonize them unduly. Understand how far you can go in  your demands without losing them. Have a sense of where brinkmanship should stop so that you don't overplay your hand. And once the contract is signed, forget the negotiation game and give credit where credit is due. If they live up to your expectations, let them know it and, more crucially, let the rest of the industry know it. Drive a hard bargain but be a fair customer.

...And not this

One last thing: Realize you may not be the only one reading this post. Your vendor may have beaten you to it.












(This post focuses on pricing issues related to software vendors. Of course, an HRIS project often involves another  vendor, a system integrator, which brings pricing and contracting issues of its own. I will discuss those in a later post)
    

Sunday, November 15, 2015

Terror strikes my hometown and neighborhood - AGAIN

PARIS
My second city's tribute to my
hometown
To paraphrase Oscar Wilde, for a global city to be hit by a terror attack once a year can be considered a misfortune; to be hit twice smacks of gross negligence. Add to that that my neighborhood is the only one with the dubious honor of having been targeted twice makes me wonder if time hasn't come for me to move permanently to my second home, Rio de Janeiro. Now, that would be the mother of all ironies: seeking refuge from terror in a city well-known for random violence.

But we live in troubled times where what made sense for so long suddenly doesn't. Here is a short summary of the last 48 hours.

As (bad) luck would have it, as in the dreadful events last January (which I recounted in this post ) I was at home on Friday evening, relaxing from a long week of SAP-to-Workday workshops at French pharma giant Sanofi, when I heard the ear-splitting sound of sirens. At the beginning I didn't pay much attention, but after a while it suddenly hit me that the blaring sirens had been going at it for a good fifteen minutes. A quick look at the city skyline didn't reveal any Neronian fire. An accident, maybe? Then the ominous alternative crept into my mind: another attack?

I grabbed the TV remote control and tuned into one of the 24-hour French channels. My hunch was confirmed: another series of terror attacks have hit my hometown with my neighborhood once again targeted.(Dear Mr. Terrorist, I don't mind your being bloodthirsty. But do you also have to be unfair? Would you mind spreading the victim share among all Paris districts? Next time, could you try Montorgueuil?  Or the 16th arrondissement? Why not cross the Seine and have fun in the Left Bank?)

Since the action was taking place just a few blocks away from my place, I grabbed my coat and ran out. It was around 11 pm. By then I had already received some text/Whatsapp messages from friends and family who, when apprised of my intention to go to the Bataclan concert hall, tried to dissuade me. But there was no way I was going to experience the events vicariously on a small screen when I could witness them live.

The next few hours will probably never be erased from my memory. In the cold fall night I stood and watched as the elite security squads forced their way in using their guns in deafening noise, soon to be followed by explosions as the terrorists blew themselves up. Then the sad sight of bodies being retrieved. My phone battery died but I managed to shoot (no pun intended) a couple of videos and take some pictures. I'll never forget the distraught young man whose two brothers were inside the Bataclan (where I had been many times for some popular parties) and who tried to go in but was restrained by the cops (I later heard they had both died).


video


Few people managed to sleep that night in the neighborhood, or in the city. The next morning I woke up early and went back to see the remains of the carnage: the sad pair of shoes of a concert goer who never suspected that his Friday fun would put an end to his life. Still-fresh blood on the pavement was a reminder of the horror that took place just a few hours ago.
Apologies for the gory details but sometimes you need to
face reality head-on

People were too shocked to engage in meaningful and rational discourse. But some questions were being asked and the government's official version challenged:

- Some claimed that many who died didn't die at the hands of the attackers but as side effect of the police action - collateral damage, they'd call it in the US (but the supine press won't tell you about it.)
- Also, how come that for the second time in a year, and even more spectacularly, terrorists were allowed to operate freely in France?
-Was this timed for the the looming key regional election where the incompetent government headed by the Clown-in-Chief; François Hollande, is expected to suffer a big defeat? (I watched him on TV and his incompetence was eerily reminiscent of Gerge W. Bush as captured in Fahrenheit 9/11: both "leaders" showing they were not up to the task)
- Should France continue to target IS (Islamic State - not Information Systems) in Syria, if IS can retaliate so easily and spectacularly in France?

A victim's scattered sad belongings:
A testimony to the horror  that took place a couple of hours ago


The media vultures were all over the place and I was flabbergasted to see their reporters interviewing basically anybody who walked up to them and served them any cock-and-bull story. A Spanish anchorwoman basically bought lock, stock and barrel what was clearly the rants of an old woman who kept on referring to the Second World War. Other reporters fed their audience the asinine comments that all of us will later lap up while watching TV. A wise neighbor told me, "The only group who knows less than reporters is the government: and the little they know, they are not telling us." Couldn't disagree with him, since the entire French political class has lost the last shreds of respect from the citizenry. They can't fix the environment, but spend billions organizing a useless COP21 jamboree whose only function is to serve as a political marketing ploy for the government (regional elections were undemocratically pushed back to help the moron masquerading as French president win a few votes with the event's reflected glory). They can't fix the economy, nor unemployment now at record levels, and even less immigration. At least we thought they could keep us safe but, as this year's events are proving, the political class is also proving to be an abject failure at security. So, why are we putting up with them much longer? Shouldn't such low performers have been discarded long ago? Beats me.

In moments like these, scared people give the impression of rallying behind the "leader" who has no idea in what direction to lead us. But deep down inside of them, most know it is hopeless.

video


Last night, I took the metro around 10 pm and was deeply shocked to find it empty. I was born here and have never seen an empty metro on a Saturday night. The streets were equally empty, reminding me of that Friday in the early 90s when I was living in New York City and we were told at noon to go home because of the fear the Rodney King riots from Los Angeles would spill over in Manhattan. Last night in Paris I was eerily reminded of that distant Friday when I walked from the UN building towards Grand Central Station and the greatest city on earth was deserted in anticipation of possible mayhem. But in ghost-town Paris disaster had already struck. And will strike again. No solution is in sight.

Poor Paris.

Poor France.

(Except for the Christ the Redeemer picture, all photos and videos by the blogger)

UPDATE: Nov. 26, 2015. A week ago, while browsing through press accounts I stumbled on the name of a victim ("Djamila Houd") and her place of origin (Dreux, South west of Paris). I immediately emailed Tassadit Houd, one of my oldest friends, who is from Dreux, asking her whether she was a relative. I was getting worried when I couldn't get through to Tassadit and today I finally heard from her: Djamila was indeed a relative. Her own sister! She and her family are devastated. It took them 10 days before they got to bury her. Djamila was having a quiet dinner at the sidewalk restaurant La Belle Equipe (belonging to her husband, Gregory) when she was shot twice in the back. Here's the account by the local paper. In the family picture at the funeral my friend Claire Tassadit is the second from the right. Another press report quotes my dear friend Tassadit's tribute to her sister.


IN MEMORIAM
Djamila Houd, a Muslim victim of Islamist terrorists.

She leaves behind a husband and an 8-year-old girl who
will become a "Ward of the Nation"

Friday, October 9, 2015

Burying the bad, sad joke of Safe Harbor and what it means for cloud users and vendors

LONDON

Apart from famous Mozart and infamous Hitler, Austria is not known for its oversupply of men who will leave their mark on mankind. Since this week we must add to the list Max Schrems who, with admirable boldness, stamina and single-mindedness, has convinced the European Court of Justice to pull the plug on the charade that the so-called EU-US Safe Harbor agreement was.

For those of you who hear about Safe Harbor for the first time, suffice it to say that it was a cosy arrangement whereby (mainly US) technology firms pretended to ensure their customer data were safe (especially from an increasingly nosy US government) and European governments and companies pretended to believe them.

Enter the young Austrian and things will never be the same again. Although an early and enthusiastic advocate of the cloud, I have repeatedly warned my Europe-based clients that going with a US cloud vendor now entails significant data-privacy risks. This does not mean you should stop considering Salesforce or Workday, but you should be aware of the risks posed by your employee and customer  data being siphoned off to the US and finding their way to a competitor – or worse. One of the largest European manufacturers, whose only competitor is based in the US, is about to move from SAP HR to a cloud solution (NDA commitments prevent me from mentioning the client's name). It has the option of either sticking with its well-known vendor and adopting SuccessFactors, or picking HR's favorite, Workday (with Cornerstone for LMS.) The option is therefore between a comforting European vendor and two US vendors which could pose a significant risk since this client's business is basically a duopoly between them and the American competitor.

European hero
Let’s not be naïve. Industrial espionage is a reality and just like European governments try and help their companies win new markets so does Uncle Sam. Except that the US government  has at its disposal cutting –edge technology and an arsenal of acts of  Congress that gives it unparalleled  power to do basically what it wants. If the US government had the moral stature of the Dalai Lama we probably wouldn’t worry. Unfortunately, trust in the US government (never very high to start with - remember Nixon, the Criminal-in-Chief of the 1970s?) has been steadily eroded by the Bush and Obama administrations’ continual assaults on public freedoms and individual rights.

In Europe, whose contribution to civilization includes the two most powerful totalitarian regimes of the 20th century, we take data privacy way more seriously than across the Pond. Hence the Safe Harbor agreement we insisted on for lack of a better alternative. Except that the agreement soon turned out not to be worth the paper on which it was written, as we realized that technology firms’ self-certification didn’t amount to much.

With Safe Harbor now in tatters, we have a unique opportunity to fix this issue in a more credible way. One key demand of Europe which must be met is to put an end to America’s extra-territorial laws. Just as European laws cannot apply in the US, the arm of American law cannot extend beyond its shores. Facebook/Google/Apple/Amazon/Workday/Salesforce/Microsoft must NOT be forced by US courts to hand over data stored offshore. (Hats off to Microsoft for steadfastly refusing to comply with orders to hand over European customer data) User organizations must insist on their data being stored in their own region with full guarantees that no access from the US would be allowed.  Of course, this is easier asked for than complied with. If a vendor’s California-based support technician accesses a   European customer’s system to fix an issue,  the data may well find itself replicated on a US server where it would fall under US jurisdiction. (And careful about that spreadsheet of employee bonuses being emailed from a European office to a manager in the US - that may no longer be legal).

At Cornerstone's Convergence event in London this week, I asked their founder and CEO, Adam Miller about it. He promised they would never transfer European customers' data to the US.
"What if a  US court requests you to hand over the data? Will you refuse to comply?"
"We will not  hand the data over, because it is not  ours. It is our customers'," Adam replied categorically.

I always find it very entertaining to see some SaaS vendors insist that, during implementation, all customer data to be migrated can only be  sent via a secured, encrypted STP server, never by email or a thumb drive in order to ensure system integrator (SI) consultants never have  a copy of your data. Well.... Many screens or reports can easily be exported in Excel or PDF format on a desktop or laptop. No SI checks at the end of the day that their consultants’ laptops are clean. Nor do they prevent external hard drives being hooked up to their computers.

My advice to my clients: be vigilant. Model clauses are a way to go, but may not be enough.  Know what is at risk, what you can live with and what you can’t. And challenge your cloud vendor. Tell them that being compliant with their home government is fine, and even mandatory in many cases, as long as it doesn’t adversely affect you. But one thing's for sure: with this landmark ruling , data privacy in Europe will no longer be the bed of roses it has been for American vendors. Their cost of doing business has clearly gone up one notch.