The man in charge of SAP's Business ByDesign Cloud offering is now in joint charge of the entire company, potentially heralding a ramped-up Cloud push for the software giant.
Jim Hagemann Snabe, head of product development, has been promoted to co-CEO after the company’s supervisory board decided against extending CEO Leo Apotheker’s contract. Although Apotheker has been with SAP for more than 20 years, his resignation comes less than 12 months after he took the helm in May 2009.
The Walldorf, Germany-based firm will now return to its tradition of employing joint CEOs. Alongside Snabe, the board has appointed Bill McDermott (above left), head of its field organisation . They are both existing members of its Executive Board. Hasso Plattner, the supplier’s co-founder and chairman of the supervisory board, said the move would “allow SAP to better align product innovation with customer needs”.
In a further move that suggests a more dynamic, product-focused push for the firm, Vishal Sikka, chief technology officer, has also been appointed to the executive board. Thomas Otter, an analyst at market researcher Gartner and former SAP employee, commented that the vendor needed to develop a “more compelling technological vision” because its current messages were not exiting anyone.
Moreover, the company was no longer agile enough to counter Oracle’s attempts to steal customers, while a recent internal staff survey had indicated that Apotheker had failed to motivate them. “The recent employee survey highlighted that under Leo, employee morale dropped significantly. This was a major influence on the board’s decision to change, probably more than the 2009 financial performance,” Otter said.
SAP’s total revenues dropped 8% to Euro 10.7 billion in fiscal 2009, while its software licence revenues fell by 28%. But Paul Hamerman, an analyst with Forrester Research, told Bloomberg that he believed Apotheker’s controversial attempts to change customer support contracts had not helped either and that SAP needed to look outside of the company for new ideas to revive growth. “What happened during the past year was a contentious relationship that emerged with customers over enterprise support prices. They lost touch with their customers. I think Leo’s persona didn’t help. At times, he was defensive and condescending toward the media and the customers."
Peter Goldmacher, an analyst with Cowen & Company in San Francisco, was even more radical in his views, however.“I think SAP is structurally impaired and I don’t think anybody can change that and get them out of the tailspin. I don’t think SAP is competitive as an independent company. They need to be acquired,” he said. But Goldmacher added that such a move was unlikely in the short-term as “management will exhaust every opportunity before seriously considering shopping around for a buyer”.
Slow to float to the Cloud
SAP has been slow to react to the move to Cloud Computing and Software as a Service (SaaS) with its Business ByDesign low end offering widely perceived as late to market and still only on limited release at a time when the likes of Salesforce.com and NetSuite have staked claims to the mainstream.
SAP Chairman Hasso Plattner alluded to some of this when he noted: "We are at the advent of some of the largest changes in our industry in terms of computers. It would be absolutely catastrophic to be stuck in the maintenance side and not be storming ahead in innovation. We have to maintain and innovate, and the company will do both."
Apotheker had recently bigged up the Cloud push. "We don’t think the Cloud is just a mythological phenomenon,” he said. “It is actually a real thing. But our answer regarding the Cloud is a little bit less hype and would like a little bit more hybrid, because at the end of the day our customers want to do hybrid. We believe in choice. We believe that customers should be able to choose between on-demand and on-premise, and we believe that we need to combine the best of these two worlds, and not segregate them. So we are going to give our customers choice and flexibility. They can choose between on-premise, on-demand, and a mix of both. We will enrich the Business Suite and SAP BusinessObjects with competitive on-demand extensions."
James Governor, co-founder of Redmonk, commented that SAP has a lot of its Cloud story in place, but needed to communicate it more effectively. “The pieces are there. SAP could do a lot more, and from a generational point of view Snabe is the obvious guy to lead the charge,” he noted. “SAP needed to mollify customers before selling them any new software. All the focus was on maintenance rather than new licenses. Its important to note that SAP already planned to accelerate its Cloud push...This just gives the push a new figurehead.”
Angela Eager of research firm Ovum added: "SAP needs to demonstrate its ability to innovate, and recognise and adopt new business and technology trends - such as Cloud Computing. SAP's slow acknowledgement of Cloud Computing and SaaS technology trends lost it credibility as an innovator. The SaaS Business ByDesign is a nexus for questions rather than solutions.”
For his part Apotheker insisted that he did what was best for the company during a "brutal economic crisis." In a memo of staff, he said: "I regret that I wasn’t able to earn the support of each and every one of you, but I serenely stand before you today with the knowledge - and the clear conviction - that what I did was for the best of the company.
"I want you to know that these decisions, and in particular the reduction of staff, have been the most difficult decisions I have ever had to take, but I take comfort in the knowledge that we acted in a socially responsible and humanly respectful way. Confronted with the worst and most brutal economic crisis since the Great Depression, and faced with the consequences of decisions and actions made in the past, the executive board under my leadership had to take some very difficult decisions to steer SAP through the worst storm in its history."
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