SAP Weekly Chart; Is AI the Second Coming?

How's the AI hype going? The key company that comes to mind when gauging how useful AI applications may be in the future is SAP. Keystone worked with SAP software 25 years ago when they came on the scene. It was funny back then since anyone that worked directly for SAP would take offense if you called the company and software 'sap'. In America, a sap is a fool, dolt, jackass, and/or idiot like the corrupt republocrat and demopublican politicians. The name is pronounced as its initials; 'S, A, P'.

The kiss of death opening a downward path for AI-related stocks was a couple-three weeks ago when a couple companies using SAP software had made comments that the AI stuff may currently not be worth the extra costs. The companies did not see much benefit in productivity versus the disruption and moving to something new or an add on to existing platforms. Good Night, Irene.

If a premier software giant in making businesses run efficiency is having trouble selling their AI wares, the benefits of artificial intelligence are likely much further out in the future. The chart says it all. The AI hype is in full swing for about 3-1/2 years already. Time flies. And Emperor Jensen at NVDA and others continue to profess great things and promise magical kingdoms once AI, that is nothing more than a large language information aggregator, is implemented. Everyone is still waiting. Jensen said in the speech the other day that (software) applications will be the key for AI going forward.

The upside of the party is fun with traders and investors tripping over each other to buy shares. Everyone wants a piece of the action and to taste the favorite flavor of the day. The party is in full swing into the beginning of last year when people do start looking around and asking, "Where's the beef?" SAP plummets over the last 9 months losing half its value. Joe Sixpack, Bonita Bagholder, Sammy Sucka and Carmelita Retail bot into the hype last year just in time to be left holding the bag. Suckers all.

In 2003, Keystone was brought in to help an engineering company that was struggling. After marking up a drawing to the point it looked like someone bled all over it, Keystone told the managers that it was the most shoddy engineering he has ever seen. They did not like that. At the same time, the company was trying to implement SAP software to improve efficiency and company operations from sales  through manufacturing, production and shipping. It was a mess. It was obvious that they did not understand the work flow through their own business. You cannot make something efficient if it is a pile of pig slop.

After Keystone's descriptive and derogatory language to the managers, he figured they would show him the door so he went back to his office and surfed the internet waiting for the news to hit the road. The manager comes in and says the owner/president wants to talk. Wow, they are going to send Keystone off with a big kick in the pants by the big guy himself. The owner instead told Keystone that he knows he has a problem with the engineering as well as the operations of the facility and asked him to stay on and help them fix their problems and implement the SAP ERP platform. The president set Keystone up in an empty office next to him on the second floor. That was a sweet gig for the next couple years.

Back then, many businesses operated by the seat of their pants. As employees were added, company duties became a gray area with many people doing many different tasks and jobs overlapping. Orders would come in and be slowly walked through the mess of a system. The first step was organizing the company, all the jobs, writing job descriptions, identifying the work flow through the company, etc... After that, the SAP software was far easier to implement and for it to make a difference. The company lost about $3 million when first trying to implement SAP but as it worked out over the following years, it definitely made them a better company and it is thriving to this day and double the size it was back then.

What is the lesson in all this? Years ago, companies were very inefficient but not anymore. Businesses have gotten rid of dead weight, implemented software such as SAP, and everything runs lean and mean. Companies starting out nowadays are lean and mean and starting with business software platforms in place from the get-go. It is a different world.

Now AI, the Second Coming, is supposed to be part two of this great efficiency awakening. Probably not. Some departments in companies are down to one person already. You have to leave someone in each department to at least turn on the lights and make coffee. The benefits of SAP business software were obvious from 2000 to 2015 but by 2020 companies have that game down pat. The work flow from the sales department to manufacturing is smooth for most companies nowadays.

Would spending lots of money on new SAP software, plus the disruptions of implementing the new methods, make enough of a difference to justify the cost. Some are already saying no. Why mess with something that already runs fine? If each Friday you punch a button on the keyboard and all the reports print out effortlessly, that are already set up in the system and on printers, why would you mess with all that for the sake of adding new software that produces the same report? If you can cut your lawn with a push mower and it takes an hour, but you can do it in 45 minutes on a lawn tractor, is it justified to buy a $5,000 piece of equipment instead of a $300 push mower? The evolution of AI in all its many facets will be interesting going forward.

A smart manager will nix the implementation of AI now. Why be a guinea pig? Let them work the bugs out and develop AI software that will actually make a difference. A smart manager will tell the AI salesman to check back in a couple years. If your company is running efficiently, and everyone is happy and making money, why mess with it? The same idea holds for buying a new car model. Never buy a new model car in its first year because there will be bugs and problems. Ditto the second year model. But if you like the style and want to own one, buy the third year model because by then any bugs are already fixed.

Artificial intelligence will have its day in the sun, but it will likely take far longer than the current group think believes especially from the enterprise resource planning (ERP) perspective. AI's main function will be for military, government and surveillance applications. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.