SAP’s Sudden Change at the Top
Global vendor replaces CEO as it seeks new direction

by Mark Smith | 2010-07-28 | Article ID: V10-38 | Article Type: VentanaView

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Business Research: Business, Customer Performance, Finance, Operational, Sales, Supply Chain, Workforce

Technology Research: Business Intelligence, Information Management, IT Performance, Operational Intelligence, Location Intelligence


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Summary
On Super Bowl Sunday SAP made its own news by removing Leo Apotheker as CEO and naming two other executives to share the job. Apotheker had held the top spot for less than a year, but spurred by investor unrest, declining application suite license revenue and weak year-end results, the executive board made the change. Geared primarily to serve customers in vertical industries, SAP has not responded well to challenges from smaller vendors that sell products designed for specific tasks in organizations regardless of industry. To rebound, the company likely will need to change the way it approaches customers and perhaps its company culture rather than just the faces in the CEO's office.

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The termination of SAP CEO Leo Apotheker and the promotion of Bill McDermott, head of the global field organization, and Jim Hagemann Snabe, head of global product development, to co-CEOs (a familiar arrangement for SAP in recent years) brought out into the open the rumored turmoil within the enterprise software vendor. Remarks by board Chair and cofounder Hasso Plattner implicitly acknowledged troubles as he acknowledged the findings of the most recent annual survey of employee satisfaction and vowed to re-establish the trust needed to keep customers committed to SAP .

Plattner pointed out some things SAP is doing right, including investing in R&D, making product teams more agile and trying to execute product-related decisions more swiftly throughout the company. SAP has made advances in its enterprise software portfolio and applications strategy as well, but it faces tough competition from dedicated software companies that provide on-demand delivery of products for specific tasks as well as, of course, from IBM and Oracle, which have extensive middleware and applications and operate globally.

SAP's biggest challenge is to break into high-growth markets. It has continued to focus on selling application suites into vertical industries where customers no longer are spending significant budget resources beyond paying maintenance fees. SAP also needs to recognize that customers have shifted more responsibility for technology decisions from IT to business units, and these buyers look for unique ways to apply tools to their particular functions.

Assessment
SAP needs to demonstrate commitments to strategic areas of growth such as on-demand delivery and cloud computing, analytics and BI designed for business and not just IT, and governance, risk and compliance (GRC) and performance management for business. The company should focus its discussions less on technology and infrastructure and more on solving business issues. It has plenty of viable products in its portfolio, and more focused and savvier marketing with dedicated inside sales teams could help it find the growth opportunities it needs so badly. Current and prospective customers should watch what SAP does and compare its offerings to what their organization really needs before investing further.

 

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