SAP's New Direction: What It Means

Rumours began circulating early this weekend that Léo Apotheker’s contract would not be renewed. The highest level sources confirmed this early in the morning yesterday and the afternoon press release provided confirmation of the details. A few key facts:

• SAP moves back to Co-CEO management structure. Bill McDermott, head of field organisation and Jim Hagemann Snabe, head of product development become Co-CEOs.

Point of View (PoV): For undisclosed reasons, Leo’s contract was not renewed. Both Bill and Jim have extensive experience at SAP and have been hard at work revitalising the organisation from both the sales and product sides. Many observers may be surprised not to see former Business Objects CEO John Schwarz in the running.

• Executive Board elevates role of products and technology. Vishal Sikka, Chief Technology Officer (CTO) now appointed to the SAP Executive Board.

Point of View (PoV): Vishal has the trust and ear of Hasso Plattner and Jim Snabe. The net result may be more unified roadmaps, better prioritisation of R&D assets, and lesser issues with product development.

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Though a seasoned executive with over 20 years with SAP, Leo was in the wrong place at the wrong time. He was responsible for doing a bang-up job in sales when Henning Kagermann (i.e. the former CEO) was around. In fact, he made Henning look good despite the difficulties in launching mySAP ERP 2007, SAP ByD, and a host of other failed projects. Unfortunately, he entered a down market while in charge of a sinking ship. Low morale among the Walldorf engineering team, the issue with Enterprise Support and maintenance, and uncontrollable poor quarterly performance proved to be factors beyond his control. Customers over the past two to three years began to wonder how to tap SAP’s innovation. A clear need emerged for having more technologists at the helm.

Putting McDermott as Co-CEO makes sense. He 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. Engineering and products need more attention to bring out trapped innovation at SAP.

‘Ray’ Wang is Partner Analyst-Enterprise Strategy, Altimeter Group.