SAP moves to restore customer and employee trust

News Analysis

SAP moves to restore customer and employee trust

Warwick Ashford

SAP chief executive Leo Apotheker has resigned with immediate effect after the company's supervisory board decided not to renew his contract, which was due to expire in 2010.

The supervisory board is hoping to restore confidence and trust in the company's leadership, but customers could also benefit through more innovative products.

SAP is returning to a joint-CEO structure, with head of field organisation Bill McDermott and head of product development Jim Hagemann Snabe as co-CEOs.

Chief technology officer Vishal Sikka has been appointed to the SAP executive board and Hasso Plattner, co-founder of SAP and chairman of the SAP supervisory board, is to play a strong advisory role

Apotheker's departure, although sudden, is a natural consequence of several factors during a trying economic period, says US-based Gartner analyst Yvonne Genovese.

The most important of these are the controversial enterprise maintenance plan, declining customer and employee satisfaction, and a lack of a clear product path.

Apotheker led the drive to consolidate all customers onto a single, more expensive enterprise maintenance programme, but this angered many customers.

After a year-long negotiation process with SAP user groups, the software maker was forced to reinstate a standard support option in January 2010.

Plattner said in a conference call to partners and customers that SAP had to win back trust and had made mistakes in the past, including the way it acted over maintenance fees.

"We did not look at the issue for the angle of a user that was based on fairly old but stable SAP technology," he said.

The change in leadership is aimed at winning back the support and trust of customers as well as employees, says Germany-based Gartner research director Thomas Otter.

An employee survey in September 2009 revealed a lack of confidence in SAP leadership.

This is the most likely reason the advisory board, which has strong employee representation, has taken this decisive step sooner rather than later, says Otter.

Apotheker's emphasis on sales rather than development is another important factor, as SAP has consequently lacked a strong technology vision.

"SAP does not have a clear strategy that both communicates how SAP will adjust to current industry trends, such as cloud, and how it will enable short-term important enhancements, like analytics," says Genovese.

SAP has lacked a technology visionary since the departure of former technologies group president Shai Agassi in April 2007, she says.

In the new structure, Plattner, Sikka and Snabe will play that role and help restore the balance between sales and technology innovation that existed around five years ago, says Ray Wang, partner at consultancy Altimeter Group.

They will need strong product vision to right SAP and point it in a forward direction, and the return to a joint leadership structure will also help restore that balance, he says.

While Otter believes there was little alternative but to return to a joint leadership structure, Wang says this is the right way to go for an organisation as big as SAP.

"There is too much going on that needs attention for one person," says Wang.

US-based Gartner analyst Jim Shepherd says the move may also be in recognition of the fact that neither McDermott nor Snabe have experience of running an organisation of the size of SAP.

"There may be a feeling that their skills and personalities will complement each other," he says.

Equally as important, says Shepherd, is that both co-CEOs are popular with employees and represent a new generation of leadership without bringing in an outsider.

The new structure will help SAP push out the long-delayed Business By Design product set for the mid market and bolster product innovation back to the levels needed to remain competitive and grow, says Wang.

Shepherd says, at the very least, he expects to see some announcements about SAP's product strategy and delivery options, which will be good for customers, although this will take some time.

"SAP has not forgotten you and many successful systems cannot be changed overnight, but we will do everything possible to speed up upgrades," Plattner told customers in the conference call.


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