SAP CEO Quits; What Does The Future Hold?

SAP AG has announced that the SAP Supervisory Board has reached a mutual agreement with CEO Leo Apotheker not to extend his contract as a member of the SAP Executive Board. Leo Apotheker has resigned as CEO and member of the SAP Executive Board effective immediately.

The SAP Executive Board, in agreement with the SAP Supervisory Board, has appointed two Co-CEOs: Bill McDermott, head of field organisation and Jim Hagemann Snabe, head of product development, both already members of the SAP Executive Board.

In addition, Vishal Sikka, Chief Technology Officer, has been appointed to the SAP Executive Board. At the request of the SAP Supervisory Board, Hasso Plattner, Co-Founder of SAP and Chairman of the SAP Supervisory Board, will continue to play a strong role in advising the new leaders on technology and product development.

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“The new set-up of the SAP Executive Board will allow SAP to better align product innovation with customer needs. The new leadership team will continue to drive forward SAP’s strategy and focus on profitable growth, and will deliver its innovations in 2010 to expand SAP’s leadership of the business software market,” said Hasso Plattner.

What Industry Watchers are saying

R “Ray” Wang, Partner Analyst-Enterprise Strategy, Altimeter Group, said, “Leo was responsible for doing a bang-up job in sales when Henning was around. He made Henning look good! However, he entered a down market in charge of a sinking ship. We are hearing he was not loved in Walldorf by the engineers but will be missed by the sales teams. The issue with maintenance, poor quarterly performance, his aggressive but brash style, and a need for a technologist at the helm, all contributed to the decision. SAP needs a good technologist in place as they have to right-side the roadmap. McDermott is an excellent sales guy but the issue is not sales. It’s products. Snabe and Vishal will need strong product vision to right SAP and point it in a forward direction.”

Paul Hamerman, Vice President and Principal Analyst, Forrester Research, said, “Apotheker’s departure is not a surprise for those of us following the enterprise applications industry – his contract was up for renewal and business was not so good. Just a week-and-a-half prior to today’s announcement, SAP reported its 2009 financial results, in which total revenue declined 9 percent for the year (to €10,671) and software revenues declined by 28 percent. During his watch, customers became disenchanted over the mandatory migration and price increase related to Enterprise Support, as well as the overly aggressive sales of featured products, including analytics. Apotheker couldn’t have been expected to perform miracles in a down economy, and can’t be blamed for the false starts with Business ByDesign that he inherited. On the other hand, Apotheker’s persona projected defensiveness rather than adopting a tone of reconciliation and accountability that would have helped heal the wounds with customers.”

Hamerman further said, “With the appointment of co-CEOs Snabe and McDermott, SAP continues a long-standing tradition of promoting CEOs from within. Co-CEOs, in fact, have been used before, most recently with Apotheker serving as co-CEO with his predecessor, Hennig Kagermann, during the transition period leading up to Kagermann’s retirement. This time, the co-CEO arrangement is not so much part of an orderly succession, but rather appears to be a stopgap measure that is not sustainable over the long term. The fact the co-CEOs were appointed in this fashion suggests limited internal bench strength as well as the inability to find and engage compelling external candidates.”

Conclusion

SAP needs to get its product roadmap in place at this point, for which its new leadership has to prove its mettle and align innovation with customer needs. If the customer is satisfied, the company may succeed in reasserting its market leadership in the enterprise software space. It remains to be seen over the course of the next year where SAP’s new drivers lead it.