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.

SAP has good experience with two Co-CEOs. In fact for most of its history SAP was run by two leaders and the combination of McDermott and Snabe is certainly a good step into the right direction. However, both are sales professional too. Snabe did lead SAP sales in North Europe for long time but over the last few years had the opportunity to get experience in the product and technology areas too. Hopefully he can be a strong counterpart to McDermot to move the focus again into the direction of customer needs and product quality.

In addition to the new Co-CEOs SAP announced the promotion of Vishal Sikka, currently CTO of the company, into the board. With Sikka finally a technologist joins the top ranks of SAP again. Along with the promotion of Sikka the company reiterates the ongoing strong involvement of Plattner for the corporate technology and product roadmap. The situation reminds of the past when Plattner positioned Shai Agassi as the new company’s technology visionary, but who left the SAP abruptly in 2007. Hopefully Sikka can pick up the ball and reshape the SAP technology vision where it was dropped by Agassi.

In summary I think SAP is taking the steps into the right direction to increase the focus on SAP’s original strength: quality products and innovation to meet customer needs. However, more steps will be needed to address all challenges and to get the company back on the success track. As I predicted in Computerwoche (German) end of last year: ‘SAP has mastered stormy waters in the past and will survive also 2010, but not all of its top management.’ I was only surprised the change came that quickly.

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