Jon Reed Interviews David Foote: Podcast Transcription
SAP Skills Trends: Podcast Transcription
Jon Reed with David Foote of Foote Partners
Hosted by Demir Barlas, Site Editor, SearchSAP.com
Podcast Interview Date: May 19, 2008
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Jon Reed: Welcome to this podcast interview with our special guest, David Foote of Foote Partners. Today, we are going to focus on the SAP skills trends David has identified from the salary data he compiles at Foote Partners. We'll get the latest on which SAP skills are hot and which are not.

We are also going to ask David about the controversial issue of whether there truly is an SAP skills shortage, a hot topic at Sapphire 2008 that David was right in the middle of. This podcast is hosted by SearchSAP and was made possible by a joint collaboration between SearchSAP; my site, JonERP.com; and B2B workforce, an SAP Premier Partner.

David, thanks for joining us today. Why don't you start by telling us about Foote Partners and your unique approach to gathering SAP skills data.

David Foote: We've been well known for years now for benchmarking IT workforce things. There wasn't a lot of that going on, and yet there was huge confusion in the market going back 10-15 years ago. These jobs are changing so quickly and, as it turned out, a lot of people that do compensation and hiring were really struggling with just defining who these people are because these jobs are changing so quickly.

There came about the problem with compensation, which is traditionally tied to job titles - and people's job titles, as we all know in IT, are just stale after six months, which is a combination of vendors and products, but also just how fast IT has evolved in businesses.

So we began tracking skills, specifically the price of skills, because we became aware about 12 years ago that companies were starting to differentiate people who have the same job title by skills. For example, comparing an ABAP programmer with COBOL, with .NET, with Java, with C programmers - inherently, the problem right there is there's quite a difference in pay.

We began doing that and initially chose 10 or 15 skills, and now we're up to about 330; about half of them are certified. Half of them either have no certifications or people are willing to pay extra for them, so we call them non-certified. About 40 of the 330 that we're doing right now are specifically SAP products.

So it's been a big piece of research for us because I think we called it right on how the market's evolved.

Lastly, a lot of times you need to make an argument for people who are not technology people as to why someone should be paid more than another person, or whether they should be paid more to recruit them or promote them. If you have good hard data, not just on salary but on the overall picture of what they're worth on the market, that's important. It's been a big thing for the people that are hiring SAP professionals right now to make that argument.

Reed: David, the SAP skills shortage was a big topic of discussion at Sapphire this year, and you yourself broached the topic at the press conference that followed the keynotes. What's your take on this, and why has it become such a hot topic?

Foote: Specifically at SAP, there have been skills wars and talent wars for years. What has happened most recently with SAP is that here you've got a large - and not without precedent - a large vendor with almost 50,000 installations, 120 companies, and a very popular set of products. They have been aggressively expanding and transitioning their product lines; they haven't just been staying in one place, and they have been moving their customer base down market. Two-thirds of their installations right now are small to medium-sized companies.

An interesting thing about that is you have a very different battle for skills being fought at the small and medium-sized businesses; it's a very different set of rules and requirements. Because they have been successful - not just in transitioning their product lines, but to move to these smaller companies - it's caused skills and labor shortages that have gripped sizable segments of the employment market in North America and around the world, and created some very testy supply-and-demand fluctuations.

We do track these continuously, and we've pretty much published every three months since we started doing this in 1999. I should also say that right now this involves 21,675 IT workers whose skills we have actually been able to verify.

For SAP, it's had a cascading effect: it's not all happening at one time; it happens with certain skills and different cycles. Some of these skill spikes have been hitting closer together, and many more of them over the last couple of quarters, say three to six months. This has been a problem for SAP because usually this shows an accelerating shortage - and accelerating shortages, as you can imagine, can get out of hand quickly if you're not acknowledging them and doing something about them. At Sapphire, they have acknowledged this shortage and put a number on it of, I think, 30,000-40,000 SAP project experts. (I don't quite know what that means; I think it's a global number.)

They have also talked about a couple of initiatives they have taken, a couple of which they have been specific about, like the University Alliances program. Some they have been very vague about, like how they are supporting their channel partners, because, ultimately, a lot of vendors look at their channel partners as having the right motivation to go out and to try to create more skills and help customers because they are right on the front lines with these customers.

They have been probably a little vague on that, and what they have said to me is that they have talked about doubling their consulting workforce in Canada over the last two years, and they specifically talked to me about Latin America, where they have an initiative to add about 6,000 skilled SAP workers. They are only about a quarter of the way there.

I applaud all of that, but to answer your question, I think the four questions I would have to ask SAP's CEO if he were sitting in a room with me:

1. How many new or improved products can your customers realistically absorb, and what kind of staffing level would you suggest that they have or will need?

2. Is everybody on board that's necessary to bring these skills gaps to a manageable level? I mean that probably more in regard to channel partners, again getting back to the point of supporting them and sending them to be out there in the market helping people. And not just throwing bodies at projects, but helping them develop their projects and knowing everything about what it takes, other than manpower, to make a successful SAP implementation happen.

3. Can SAP continue to expand its base of midmarket users and keep them, and large companies that they've had for quite a number of years, equally content, recognizing that labor needs among the two bases are considerably different?

4. Lastly, can they build confidence in the marketplace that these new manpower issues that they're talking about, and probably will continue to talk about, will bear fruit - and by when?

In summary, I can say they took on a very tough skills challenge when they embarked on certain strategies, and it's going to be tense for a little while, we're seeing, because it's just not easy down there at the small and medium company level to grow internal talent. And that tends to be what you do when there are skill shortages: accelerate the learning curve for internally growing expertise. That's very hard to do, even for large companies; a lot of them do a very poor job of that -mentoring, coaching, training, stuff like that.

But for small and medium-sized companies, for those of you who are listening today, SAP workers in these environments usually wear multiple hats. They require more than one specialization. If you come in, you hit the ground running and you never stop running and you are usually too busy to train people.

These are employers with little or no bench strength: They can't just shift resources around - take some people offline, put some people online - and there are minimal requirements (that maybe we'll go into later in the conversation) for what kind of people they're looking for. I think there is going to be a lot of pressure with those people, and we'll talk about what some of the solutions might be for the small to midmarket today.

Reed: One of the aspects of the SAP skills debate that I think is important is that not all SAP skills have the same level of demand at any particular time. The great thing about your quarterly reports is that you're up to speed on what data is tied to skills trends that are happening now, so tell us your latest research findings on which SAP skills are hot.

Foote: Yeah, let me tell you how we define "hot" here. I am an ex-Gartner guy, we have some ex-Gartner people here, so I guess I am wedded somewhat to the magic quadrant. The way we built that magic quadrant here is talking about skills that are strong to weak, which is based totally on the amount of money people can earn if they have it: Are they talking about 12% of base pay or 3% of base pay? Strong would be up at the top of the range.

Then we talk about skills as cold to hot, which is the growth rate. What you want is something that is up in the upper right hand corner, which is paying a lot right now and is also on a tear, so it's going to be worth a lot more. That's how we frame this.
So I'd say right now, in terms of what's really been rising in pay and has also been earning a pretty good wage, I would put NetWeaver BI in this category, I'd put a variety of SAP ERP skills in that category, and I am not at all surprised to see what SAP MDM has been doing lately.

I think with MDM it's early in the game, but largely companies want to be more flexible and agile (which is what SAP would love all our customers to be; it's part of their construct, what they're building and their products), but one of the things that gets in the way of flexibility and agility is the amount of data companies have and the ablity to manage that data. We've gotten a number of calls from companies that are starting to hire MDM analysts and the MDM Master Data Managers, so we're aware that there is a lot of interest out in the field, and people are starting to reorganize for that.

I would also put the old standbys in there: SAP CO and FI are paying a pretty good wage, well above average. We're seeing a 20% growth in pay for both of those over the last nine months. Continuing on: NetWeaver Application Server, SAP Project Systems, SAP CRM, and even Materials Management - and also SAP HCM. These are all areas where we've seen growth over the last six months to a year. We can get more specific if you'd like, but they're pretty good bets right now for strong and also growing.

Reed: According to your surveys, which SAP skills are heading hot to a little bit colder in your estimation?

Foote: If we say cold (or not so hot), it's not that there isn't demand for them, but in terms of pay and the economics of when supply catches up to demand - even if demand is high - some of those numbers will start to fall off and flatten out.

If I were to look at that list, I would look at ABAP, Basis, SAP Payroll. We've seen some diminution of pay in SD, Sales & Distribution. We've seen a little fall off over the last year in NetWeaver PI (there was a dip in demand for a while there, about nine months ago) and also in the SAP Web Application Server; they've lost some of their ground. I don't know if I would call them cold, though, but it wouldn't come as any surprise to this group to understand that Basis might be losing a little of its value. And ABAP is because of the changes in the product line and what SAP has been doing with their product lines lately. There are certainly an awful lot of Java people working in this world, too.

And I'm not speaking today about non-branded SAP skills. We could have quite a bit of discussion about all the infrastructure and security and all that which surrounds SAP implementations, but I am speaking today specifically about SAP-branded products.

Reed: David, at the heart of the SAP skills shortage debate is the question of whether SAP customers will be able to find the skills they need to staff their product initiative. With that in mind, what are your recommendations to SAP product teams in terms of how to best fill the skills gaps on their projects and how to retain that talent once you have recruited it?

Foote: Well, I'd have to start with prayer to begin with. Short of that, I'll say that one of the reasons I go to things like Sapphire or TechEd or other conferences is because these are places where people should be recruiting team members.

If I were a person who has been working in SAP, I would use these occasions to recruit people to come and work for my company. If companies are not actually making that formal - that if you go to any event and you're not personally recruiting people onto your team and into your company, versus just attending lectures and going around to booths and seeing cool technology -  they're making a big mistake.

A lot of this happens at a very organic level just because you can't trust technical recruiters in HR departments to simply go out and find a lot of talent. We talk to people all the time from HR departments because they're interested in some of the benchmark research we have, and we don't necessarily feel they have a good grip on what's going on in SAP. Not the kind of person you want to send out looking for talent. Also, they might be a little too caught up in filtering some of the resumes coming in for certain acronyms and stuff like that, when there are people with SAP experience that you wouldn't necessarily find in the title of their job or even in parts of their job description, but that might be exceptional SAP people. It's just important that you take recruitment into your own hands.

Another thing is that you've got some companies that are better than others in terms of putting a carrot in front of people, in terms of career development. Some companies, particularly at the small to medium-size level, some do think about where some of these people are going beyond simply the project they're working on right now.

If you're lucky enough to work for a company that does any kind of development in terms of career progression - we call them professions programs - where you really look at people in terms of the professions they're in and where they're going to be two, three or four years from now, then how they've gone about getting the conversation in front of the management - those companies have a much better chance of recruiting people.

But internally, if you're going to develop people, if you're one of those companies where you're just going to have to develop people, you have to have formal coaching and mentoring programs. You can't just expect the stuff to happen organically.You have to really encourage a lot of people who could work in the SAP department or projects teams who are not working in SAP right now, who might be working in other parts of the business - say Java programmers or other technologies that are symbiotic with SAP - to encourage them to want to come over and work in the SAP department.

It's been incredibly successful for people in security when they were looking for security talent after 9/11. They just went to every network administrator, every systems administrator in the company and said, "Why don't you come work full-time as a security administrator? You'll have to get certified; certain things are different about what we do here, but come on over and do it."

I think there is a lot of internal selling that people can do to encourage people internally to come over and work; it's not necessary all the time to look to the market. But if you do, don't entrust your HR department to find those people. Get personally involved.

Reed: When we talk about the SAP skill surge, we usually get into these broader, impersonal conversations about trends, but when you think about the average SAP professional, the impact of SAP skills trends couldn't be more personal: If you don't make the right project choices and expand your skills, you might find yourself with yesterday's skills struggling to find those new opportunities.

With that in mind, what are your recommendations to SAP professionals on how to stay marketable?

Foote: Generally speaking, it can be beneficial to find partners. The best way to grow a career - to grow your own career, to manage people, help their careers, make decisions about this - is to talk a lot, band together. You're not a distant individual island in a company; you've really got to create affiliations internally. How companies do this - again, going back to that project team question - is partnering with boutique consulting firms, with other small companies. A lot of it is networking, partnership - don't just look for this open market.

That's what you can do internally, as well. For example, if I were most people in SAP right now, I'd go narrow. It's against the grain in terms of skills specializations, it's against the grain of what you want to do in a recession when you want to be more of a generalist, but I would say go narrow and pick areas - either functional areas, pick business process (that's a great area), pick industry - and get deep into that.

What's really happened overall in terms of working in IT over the years, and the reason why certification pay has really been tanking for two straight years, quarter by quarter, is that employers are looking for a much more multi-dimensional, broader skill set person in IT. They want technical skills, but they also want industry skills, familiarity with the internal/external customer - they want solutions. If they find someone who has a pretty good knowledge overall as to what's going on and where the landmines are, they're not going to care if you're certified or not. They like the fact that you really got narrowed down, and hopefully you'll pick an area that's hot. I mentioned a few that are clearly doing well right now in the SAP world. I think it's good to get narrow and very specific right now.

The great example outside of SAP is all your senior Oracle Database Administrators that had no trouble getting jobs for many years; they just kept getting more Oracle, more Oracle, more Oracle. But now, they can't get an interview at a company that wants five years with healthcare experience and two years on patient records systems. They're not even going to interview you.

I think it's going to happen that way in SAP, where they're going to want some basic technical knowledge, but they're going to want some very specific things in finance or control or quality or human resources or supply chain logistics. They're going to want it in their industry, they're going to want it with their customers, and they're also going to want you to be more predictive - even down to the level of a $60,000 or $70,000 a year person being able to really apply intuition and not just be a body in a chair.

This happens when you specialize and narrow it down, so don't be too broad and try to cover all your bases. Look like a person that really is managing their career and has a purpose to it, because I don't think a lot of employers are necessarily going to help you do that. You're going to have to do that all by yourself: personal career management.

Reed: I'm really glad you raised that point because I think there is a general perception, from the emails I get, that technical SAP work is slow and functional is where it's at, whereas in my view, I see both functional and technical SAP career paths having a lot of viability, but it depends, as you said, more on how narrow or focused those skill sets are and how cutting edge they are. If you find the right cutting edge area, whether it's on the functional or technical side of SAP, you can have a lot of success.
Foote: Yeah, there are a lot of different BPM tools and project management skills you can have, there are a lot of different modeling tools you can choose from, there's industry knowledge. Some people just are more attracted to certain industries. I know people that work in SAP and IT in the casinos and they love working for a casino. Or they love working for Disney, for example.

The product that the company has out there and the image of that company in the market, it's called "affiliation." A lot of people in IT are in it for the affiliation (which is the company they work for), for the money, or they're in it for the content of their job. It's always one of those three things, but if you can get two of those, that's really super and it shows up in your work, too.

A lot of people I know who are good in IT would bomb in a 50s Midwestern manufacturing environment, but put them in a Las Vegas casino and they're thinking about the customer, they may even gamble themselves, they have a familiarity with who goes there. As an IT person, that makes you much more effective; it's just a matter of choosing whether SOA will be your thing, whether Business Prophet will be your thing, if Web 2.0 is something you think is going to take off, or "green" stuff.

There are all kinds of places you can go, but you have to really take stock in what you want and then choose the company you want - the industry - and you can always add a number of different technical specialties later. But the most important thing is you've got to have fun on the job, you have to like where you're working and who you're working with.

Reed: We're starting to run out of time on this podcast already, and there's so much more to cover. I want to see if I can combine my last two questions into one. I wanted to ask you about certification, which you hit on a little bit already. SearchSAP not too long ago initiated a discussion about the value of SAP certification; they got pretty heated, so that raised a question about the value of certification. You referred to this a little bit in your conversation already, and it ties in with another push SAP is making to flesh out the so-called Business Process skill set and the soft skills of the BPX community.

You have noted in your certification comments that one of the reasons certification is not as powerful is because there's this whole other soft skill set or industry skill set or Business Process skill set that I think SAP is still trying to define, as we all are. How do you see those things mixing together and the value of SAP certification in the midst of all that?

Foote: I can tell you that the certification industry has largely been an infrastructure industry created by a number of vendors to support their product. Certification divisions in companies are typically in their sales and marketing departments, for instance. It's heavily been about networks, computer systems, security - deep, technical areas. And they continue to be, but, as you know, the internet created this whole wave of IT jobs having to do with applications and customer facing jobs. All of a sudden, to be a good application developer or maintenance or support person didn't require that deep, technical, in-your-face knowledge that security, networks and all of that required; it required a lot of brilliance in other areas.

That's one of the reasons why I could show you going back 10 years, looking at the applications, the database, the networking, the security, the web development, every different category - we have about thirty different categories - and how they all have reacted to economic conditions, to trends with vendors, trends with jobs: I can show you that certification will always have a play in certain areas of IT jobs, but so many more IT jobs have been created that are not in these infrastructure areas. They're in applications, architecting, project management, business intelligence, analytics - and these are all possibilities for people in SAP right now.

SAP is just a microcosm of the rest of IT, and to this point we haven't been following SAP certifications because people haven't asked us for information about SAP certification. They've pretty much been wanting to know more about SAP skills. We have 1,400 customers for our research and we have 2,000 research partners that provide all of this great information for us, and we pretty much go where they want us to go. They haven't been asking for SAP certification - yet. That could change.

Reed: Makes sense. Demir, do you have any questions you'd like to pose to David that we haven't covered?

Demir: I'd like to talk a little bit more about the competitive scenario. Certainly one ramification of the skills shortage, or potential ramification, is that SAP's momentum might slow down a little bit, especially in the U.S. where SAP is already struggling a little bit. Is there any way you can speak to the way in which the shortage might transfer some momentum over to Oracle or maybe even Salesforce.com and offer as a service front, or are these issues really separate from marketplace momentum?

Foote: They're both: They're market and they're separate. Don't forget, Oracle is not divorced from SAP. There's a lot of Oracle in SAP initiatives and implementations and stuff like that, which is true of all vendors: they're your friends, they're your enemies, they're your friends, they're your enemies. It all depends who's merging what and who's trying to buy what company out there.

I can tell you my experience when I was at Sapphire. When I was speaking to representatives of SAP, they distinctly were not talking to me about the United States. They talked about Canada, they talked about Latin America, they talked about Asia Pacific, but there wasn't much talk about the United States market. So I know that from a shareholder point of view - which is where I think good management goes with decisions - it looks like they're looking at growth in Latin America and some other countries right there.

And they want to make sure they get that right because it's hard to fix things and it's much easier to start. Like architecture: It's much easier to start architecting from the very beginning on a clean sheet of paper than it is to come in after something is in place and re-architect it.

So I'd say now, for the most part, I get a feeling SAP is paying more attention to other continents right now, which isn't to say that they're not paying attention to the United States as well.

But the other part about competing companies: Oracle also, as an example in other companies, they're having talent war issues, too. These are not specific to SAP. Right now, you've got a Consumer Price Index that's up 3.9% in April to what it was last year (it's better than it was in February, by the way). You have a Consumer Confidence Index that was at 105 last year - where 100 means things are pretty good - and it's at 62.3 right now. You've got crude oil at $98.00 a barrel in February, now it's up to $127.77. The elephant in the room is not competition so much as it is the economy.

As a vendor, you can understand that customer purchase decisions are going to be very much based on limitations, on budgets that are going to be cut, on head count that's going to be cut, and you're going to be doing a lot more with what you've got. And that helped SAP tremendously in the last recession. A lot of people just made the decision to just keep rolling with 4.6 and upgrade and not to add new products and stuff like that - that's always good for vendors to stick with what you've got. So they're going to be digging their heels in and looking to continue to sell in the markets they've got. SAP has a huge market, Oracle has a huge market; they're in a pretty good position.

Reed: Well, David, I think we ran out to time, but you certainly gave us a lot to think about and I want to wish you best of luck with Foote Partners. We'll definitely look forward to having you back for an update on your research and some more exploration of these findings.

Foote: Thanks very much. You can get information on the document that we've spoken about today that researchers call the IT Skills and Certification Pay Index, that's primarily what we've been talking about today. You can get more information about that by going to TechTarget or our site.

Reed: Great. I'd like to thank our listeners for joining us today for this podcast interview on SAP skills trends. This podcast was a joint venture between SearchSAP and my site, JonERP.com, bringing you career answers for SAP professionals.

Editor's Note: This interview is not a verbatim transcription of the podcast. It was edited for clarity and readability; however, no content from the podcast conversation was removed.

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