After the recent board changes the strategy will change too
After the recent board changes at SAP the message we could read in most news was like ‘new board – old strategy’. Along with the board changes SAP did not announce (yet) any significant strategic changes. But what good is it to change the board and leave everything else as is?
The recent SAP board changes are just the visible tip of the iceberg of much deeper changes SAP will and has to go through to renew itself as a leading IT vendor. Below are 10 predictions for changes in SAP’s strategic direction I expect within the next 10+ months:
1. More SAP Board Changes Will Come
Additional board changes will further strengthen the product & technology focus and competence within the SAP board. See also Forrester’s blog on the recent SAP board changes: SAP CEO Resigns – Long Live The Co-CEOs
2. Business ByDesign Will Get Back Into SAP’s Strategic Center
Business ByDesign will become again the corner stone of SAP’s growth strategy and the successful introduction will mark a ‘make it or break it’ milestone for SAP.
3. SAP Announces The Next-Generation ERP
SAP will announce a next-generation ERP solution to regain leadership in its core business area and it will likely be based on the ByDesign platform.
4. SAP Changes Its Cloud Strategy
SAP will rework its whole On-Demand strategy and will unify and align all components based on the ByDesign platform. See also Forrester’s recent blog on SAP’s On-Demand strategy: SAP Is Skydiving Into The Clouds.
Thursday’s announcements of additional SAP leadership changes raise more questions than they answer, but a commitment to changing the direction of the company is clear. SAP announced the departures of John Schwarz, head of the SAP Business Objects unit, and Erwin Gunst, Chief Operating Officer. Gerhard Oswald, Executive Board member in charge of global services and support, assumes the role of COO. In addition, Peter Lorenz has been promoted to Corporate Officer, looking after the SAP SME solutions portfolio. These moves follow the resignation CEO Leo Apotheker a few days ago, as well as the appointments of Bill McDermott and Jim Hagemann Snabe as co-CEOs.
Gunst’s departure, due to health reasons, was expected and was mentioned on Monday in a call with analysts and press. More surprising is the departure of Schwarz, formerly CEO of Business Objects, a respected executive who led the integration of Business Objects following SAP’s acquisition 2 years ago. It is appears that Schwarz’s departure had something to do with his not being named CEO or co-CEO, but the real reasons are likely more complex. SAP appears to be in the midst of a transition to younger and more energetic leadership, and Schwarz’s career may have had limited upside given that Executive Board members are encouraged to retire at age 60 (he’s 59).
The changes are consistent with Chairman and co-founder Hasso Plattner’s return to hands-on leadership of the company. The remaining SAP Executive Board members, co-CEOs McDermott and Snabe, CFO Werner Brandt, COO Oswald, and CTO Vishal Sikka, will be expected to carry out Plattner’s directives to restore the company’s momentum.
On Super Bowl Sunday, February 7, 2010, SAP announced that CEO Leo Apotheker’s contract will not be renewed and his resignation is effective immediately. In his place, the company appointed co-CEOs Jim Hagemann Snabe and Bill McDermott. Both executives are already members of the SAP Executive Board, with Snabe in charge of product development and McDermott in charge of field operations prior to their appointment as Co-CEOs. More importantly, perhaps, Supervisory Board Chairman and cofounder Hasso Plattner has stepped up to take a more active role in overseeing the company’s direction. Apotheker’s departure was not a surprise for most industry followers. His contract was up for renewal things were not going so well for SAP of late. Just a week and a half prior to today’s announcement, SAP reported its 2009 financial results, in which total revenue declined 9% for the year (to €10,671) and software revenues declined by 28%. During his watch, customers become disenchanted over the mandatory migration and price increase related to Enterprise Support, as well as overly aggressive sales of featured products, including analytics. Mr. 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. In fact, Business ByDesign has seen significant progress during his tenure and is now ready for market. In addition, Apotheker was instrumental in launching SAP’s strong commitment to sustainability during the past year. 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, Henning Kagermann, during the transition period leading up to Kagermann’s retirement.
SAP changes its board structure to focus again on product and technology
2009 was a tough year for the whole IT industry but SAP’s performance (-8% in total revenue and -28% in software revenue) was somewhat below the results of many other leading IT companies. The product launch of Business ByDesign is years delayed and clients are still unhappy about the way the new Enterprise Support was introduced. No question, SAP is currently in a difficult situation. At this point SAP announced yesterday that CEO Léo Apotheker’s contract will not be renewed and his resignation is effective immediately. In his place, the company appointed the two board members Jim Hagemann Snabe, responsible for product development and Bill McDermott, in charge of field operations, as co-CEOs.
After 20 years of service with SAP it would not be fair to blame Apotheker, who was certainly instrumental for SAP’s tremendous growth in the past, for the challenges SAP is currently facing. Over several years the company shifted from its traditional strengths, such as products, technology, quality and reliability to a strongly sales driven entity. In fact the whole board of SAP was slowly replaced by a team of pure sales professionals. Product innovation and quality, or customer satisfaction was no longer in the center of corporate strategy, but replaced by sales performance and quotas. In a press and analyst call today Hasso Plattner, Co-Founder of SAP and Chairman of the Supervisory Board, acknowledged that mistakes e.g. with Enterprise Support, were made, but the whole SAP board was involved and it was not Apotheker’s fault.
A brief reflection from the SAP Influencer Summit on SAP’s On-Demand strategy
At the SAP Influencer Summit in Boston Dec 8/9, SAP put a lot of emphasis on its new roadmap into cloud computing and how serious the company is taking the topic for its future success. Well, to be true SAP actually avoided the term ‘cloud’ almost entirely and talked about ‘on-demand’ solutions instead. Maybe the company stayed away from the term ‘cloud’ because there is still a lot of confusion in the market (or inside SAP?) what cloud computing actually is, or to simply differentiate from the masses that currently go ‘crazy in the cloud’. Anyways, to offer pay-by-use software applications via self-service over the web indeed is pure cloud computing and SAP has declared it to be a future focus area for the company when Jim Snabe said “… significant [SAP] investment into on-demand will disrupt the market and SAP will regain leadership in this space”.