SAP Needs Strong Leadership to Stop Sinking

Posted on February 8th, by thinkstrategies in Uncategorized. Comments Off on SAP Needs Strong Leadership to Stop Sinking

The resignation of Leo Apotheker as CEO of SAP has sparked significant speculation re: the issues which drove this decision and where SAP will go from here.

The significance of this event was clearly underlined by the role SAP’s Co-Founder and Chairman of the Supervisory Board, Hasso Plattner, played as the primary company spokesperson during a corporate conference call this morning.

During the call, Plattner made an emotional defense of the company’s strategies and tactics in response to rising criticism in the face of SAP’s financial struggles. Plattner used the occasion to dispute claims that SAP isn’t moving fast enough to respond to changes in the market by proclaiming that SAP is well on its way to becoming a “multiple product company”. He gave Apotheker credit for “turning around” BusinessByDesign and said the rollout of the v2.5 of the on-demand solution is “close”.

The reality is that BusinessByDesign has only had isolated success in a handful of deployments in the field, and its scalability from a technological and go-to-market point of view is yet to be proven.

The truth is that BusinessByDesign’s lack of success is a reflection of SAP’s lack of commitment to the solution and an overall SaaS strategy.

The company’s leadership has never fully acknowledged the fundamental changes disrupting the software industry as a result of rapidly changing customer preferences and competitive pressures. For example, various SAP leaders in the past have suggested that BusinessByDesign would primarily serve as an ‘on-ramp’ to its on-premise customers rather than a solid standalone solution. This half-hearted approach not only turned off prospective customers, it didn’t incent its own staff to make a concerted effort to develop and deliver a competitive solution.

But, SAP’s reluctance to accept these market realities may finally be giving way to a new awakening about the critical crossroads facing the company.

Although Plattner refused to specify the reasons for Apotheker’s resignation, he admitted that the company was facing growing dissatisfaction among customers in response to SAP’s decision to increase its maintenance fees and a recent employee survey also found growing disenchantment among its own staff. He also acknowledged that the cloud computing model poses a significant challenge for SAP’s underlying software architecture.

As a consequence, Plattner said “we need to reestablish the trust inside and outside” and “in order to be profitable, SAP has to be a happy company…with happy customers and employees.”

The company has decided the best way to move in this direction is with a Co-CEO leadership structure. Plattner used Larry Ellison and Ray Lane at Oracle, and Bill Gates and Steve Ballmer at Microsoft as models for success, but failed to point out that in neither case did these duos operate as Co-CEOs.

I think the Co-CEO structure may only be a temporary move to stem the negative tide until a single leader can emerge from the current duo or a new CEO can be recruited from the outside to bring fresh leadership to the company.

Ideally, this person will be able to pull the company together under a strong unified strategy backed by a series of solid tactical moves in the same way Lou Gerstner did at IBM in the 90’s.

Whether a leader comes from outside the company or within, SAP’s only hope for success is a strong, long-term commitment to change. SAP’s painful journey down the SaaS path is just the most prominent example of the many reasons why established ISVs are suffering in today’s environment. A strong leader is necessary to withstand today’s challenges.

(Disclosure: I have done consulting work with various groups within SAP.)

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