Peyton Manning and the Indianapolis Colts weren't the only heavily favored players to be upended on Super Bowl Sunday. Nearly drowned out amid the pregame media hype and the most-watched television broadcast in history, enterprise software company SAP called an audible of its own -- the resignation of its chief executive officer, Léo Apotheker. With Apotheker's resignation effective immediately, the company named two longtime SAP executives as "Co-CEOs" to replace him: Bill McDermott, who will lead global field operations and oversee the company's strategic business activities, and Jim Hagemann Snabe, who will guide the company's technologies and internal product development. Both men were already members of SAP's executive board.
[Editors' Note: The company's terse Sunday press release can be found here.]
Hasso Plattner, a company cofounder, former CEO, and still chairman of the SAP Supervisory Board, further detailed the management shift during a conference call this morning with media and analysts. During the call, Plattner also noted the departure of the company's chief operating officer -- "for health reasons," Plattner said -- and the expansion of SAP's executive board to include Chief Technology Officer Vishal Sikka.
Despite the significant impact on the management structure of one of the world's largest software companies, many industry analysts say the move is hardly a surprise, given SAP's recent struggles with quarterly performance, the long-delayed launch of its Business ByDesign software, and recent controversy over proposed hikes in maintenance fees.
Declining to provide concrete reasons for Apotheker's departure, Plattner nevertheless went to great pains to discount the rumor that the resignation (or, more precisely, SAP's decision not to renew Apotheker's contract) was directly attributable to missteps involving Business ByDesign: "When the press writes that [Business ByDesign] is the reason for not renewing the contract with Léo, this is wrong. This is just wrong," Plattner said. In fact, he assured press and analysts that there would be little deviation from Apotheker's intentions for the company's future. He stressed that SAP will continue to execute on its existing plans -- moreover, he said, any internal discussion along those lines would merely be to ramp up the pursuit of SAP's goals. "There was no difference between Léo and myself on strategy," Plattner said. "We will revisit the strategy, but solely from the point of acceleration of the execution."
Plattner made clear, however, that there will be changes in the way SAP delivers in the future. Despite the traditionally favored SAP style of incremental improvements, he said, some changes of a more extreme nature might be necessary going forward. "Radical changes have to take place where the opportunity presents itself," Plattner said. "We are in a crossroads in technology." The chairman then went on to say that SAP is prepared to take advantage of large in-memory systems, on-demand and cloud computing, and technology such as Apple's iPad -- a topic, he added, that will be central to his keynote address at the upcoming Sapphire user conference in May. "I hope that I don't promise too much," Plattner joked, "because I'm only chairman."
Although the putative goal of Plattner's conference call today was to clarify the changes in SAP leadership, China Martens, a senior analyst with The 451 Group, says that the subtext involved SAP making a major public acknowledgment of recent mistakes and missteps. One topic that kept recurring throughout Plattner's call was that of customer trust. "We have lost, here and there, the trust," Plattner admitted, noting moments later that "trust is a complicated thing." To all end users, he pleaded: "Please trust SAP -- we have not forgotten you."
Plattner's acknowledgements went further: "Unfortunately, SAP made some legal and political mistakes, especially here in Germany," he said. "We made a mistake and we have to change course here. We have to regain the trust from customers who were more than upset." Moving forward with innovation, he argued, is an important factor in regaining that trust. "We cannot say we will push back innovation for a year or two," he noted. "This would kill the company."
Admitting that "the average age of the typical SAP implementation is quite substantial," Plattner said that no wholesale change can occur overnight. "We will do everything to accelerate the upgrades," he told the analysts and media. "We will look at costs; we will reach out quickly with end users to work diligently in equipping their workplaces." He went on to say that, unfortunately, the heads of the company take a lot of the blame and that he was part of the controversial decision late last year to raise maintenance fees.
"SAP has clearly misread the market and needs to show it recognizes that," Martens says. "Although [Plattner] was clear that SAP management, including himself, share the blame for the maintenance saga and the hitches with Business ByDesign, it seems the best way to really signal a break with that past is to replace Léo."
Altimeter Group Partner Ray Wang makes the point that Apotheker's tenure could not have occurred at a worse time. "He entered a down market in charge of a sinking ship," Wang says.
Michael Fauscette, general vice president of Software Business Solutions with IDC, echoes Wang's sentiment: "Whatever you think of Léo's tenure as CEO, you have to admit two things: He had a great reputation in his previous roles running SAP field organizations and he took over as CEO at the worst possible time." The timing of his resignation seems apt, Fauscette says, as this gives new Co-CEOs McDermott and Hagemann Snabe several months to develop a unified approach before SAP's annual Sapphire conference in May. Long before then, however -- perhaps as soon as a few weeks from now -- the newly appointed duo is expected to speak to press and analysts about strategy.
[Editors' Note: CRM had the prescience to name McDermott as one of the magazine's 2008 Influential Leaders. You can read that profile here.]
As for getting to the bottom of Apotheker's departure, Plattner deflected a direct question about the resignation, choosing only to speak of SAP's future. Despite rumors that the departing CEO was not well loved by engineers at SAP's Waldorf headquarters, according to Altimeter's Wang, Apotheker will be missed by the vendor's sales teams. "The issue with maintenance, poor quarterly performance, [Apotheker's] aggressive-but-brash style, and a need for a technologist at the helm all contributed to the decision," Wang speculates.
"It also sounds as though, internally, some SAP staff had lost faith in his leadership," Martens opines, adding that she now finds a bit more significance in last month's change in board responsibilities for both McDermott and Hagemann Snabe. "While the timing of Léo's departure was sooner than expected, it was always in the cards," she says. Fauscette agrees, saying that most of the conjecture among analysts for the past few months was more about timing and who Apotheker's eventual replacement might be.
The analysts seem to concur that the Co-CEOs will not be walking into an easy situation. "The new Co-CEO team, both long-time SAPers, face some significant challenges, especially as it pertains to executing on their previously announced cloud strategy," Fauscette says. Wang also says that, although Hagemann Snabe and McDermott are seasoned SAP leaders, the company still lacks a good technologist to cement and accelerate its roadmap.
"McDermott is an excellent sales guy, but the issue is not sales -- it's products," Wang says. "Snabe and [CTO] Vishal [Sikka] will need strong product vision to right SAP and point it in a forward direction."
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