April 2, 2008

Today’s announcement of the promotion of Leo Apotheker to co-CEO of SAP AG signals an orderly transition of command as current CEO Henning Kagermann’s contract expires in May, 2009. Mr. Apotheker has clearly been heir apparent since Shai Agassi’s departure a year ago. Although SAP put a positive spin on his sudden departure, evidently Mr. Agassi was not next in line for the job.

Mr. Apotheker, a 20 year veteran with SAP, has served as head of worldwide sales and most recently as Deputy CEO. While the practice of co-CEOs could be problematic in some environments, SAP has done this before as Dr. Kagermann ascended the throne and succeeded Hasso Plattner, now Chairman of SAP’s Supervisory Board. The transition should be orderly and Apotheker is well-suited for the job.

Additional changes within SAP’s Executive Board were also announced in the same press release. Jim Haggeman Snabe, Bill McDermott and Erwin Gunst were promoted to the Executive Board. Snabe will manage product development for both the SAP Business Suite and Netweaver. McDermott will take over responsibility for worldwide sales. Gunst, the current head of EMEA operations, will become the company’s first Chief Operating Officer. The need for a COO signals the growing complexity of the business in maintaining controls over acquired businesses (e.g., Business Objects) and new products and business models (e.g., Business ByDesign). Snabe and McDermott represent new blood on the Executive Board as well, rising stars that have done well in their respective areas.

Perhaps even more newsworthy but unmentioned in the press release is the pending departure of Executive Board member Peter Zencke. Dr. Zencke is the father of SAP’s new SaaS product, Business ByDesign, which had a soft launch last fall. This is a promising risk/reward venture for SAP that has large revenue potential if it can roll out quickly enough. The speed at which the product is rolling out, or lack thereof, may be linked to Dr. Zencke’s departure. One possibility (unconfirmed by SAP) is that Business ByDesign is delayed by performance, usability, and channel development issues to the extent that Zencke was forced to step aside.

Paul Hamerman, Vice President
Business Process & Applications

R "Ray" Wang, Principal Analyst
Business Process & Applications