SAP's Tough Guy Ready to Rumble

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The company, based in the southwest German town of Walldorf, dominates the market for the enterprise software that companies use to manage finances and operations such as logistics, procurement, or personnel. But managing SAP, with sales last year of $12.8 billion, is getting to be devilishly complex as the company becomes ever more global, with major development centers in eight countries and a big push underway to make its products more accessible to smaller companies.

Understanding the Client

Investors are nervous. SAP shares have fallen 7% since January, when the company said earnings would rise more slowly than expected due to investment in a Web-based product line. First-quarter results somewhat reassured the market, though shares have continued to drift down (see BusinessWeek.com, 4/20/07, "SAP Gives Doubters Soothing News").

The new software-as-service will give customers access to SAP functions without needing to install or maintain the software on their own computers. That's a major departure for SAP. "More and more it's key that you understand the market and the client side," says Kagermann, whose current contract expires in two years. "It's different than 15 years ago. When I started at SAP we had a handful of programs."

Meanwhile Oracle is using acquisitions to try to penetrate market segments dominated by SAP. On May 15, for example, Oracle said it will pay $495 million for Agile Software (AGIL), part of a drive to challenge SAP's dominance of the market for software used by manufacturers to manage product development and quality. And Oracle is hardly the only competitor hoping SAP won't be able to change as fast as the market. "It's very hard to change the culture of a company that size, no matter what business they're in," says Lindsey Armstrong, president for Europe of San Francisco-based Salesforce.com (CRM), which makes Web-based software that companies use to manage customer information.

As if all that weren't enough, SAP is still suffering the public-relations fallout from the departure, effective in April, of Shai Agassi, the Israeli who led the company's product development effort. Agassi, who said he was leaving to pursue his interest in alternative energy, had also been seen as a CEO contender. SAP executives vehemently deny reports that Agassi's departure reflects a broader feud between developers in Germany and the U.S. (see BusinessWeek.com, 3/29/07, "Agassi's Departure Realigns SAP").

Appalling Salesmanship

Apotheker doesn't dispute, though, that a culture shift is underway at SAP. As his visit to the French Coke plant illustrates, Apotheker wants SAP engineers to be keenly aware of who is using their products and how. He argues that SAP has a good balance between engineers on one side and customer relations people on the other. "The next opportunity for SAP is to blend those two cultures into one," he says. Already he has invited customers to speak to groups of developers and is pushing developers to visit customers more often.

In fact, it was as a customer that Apotheker first became aware of SAP—and decided to join the company in 1988. He remembers being impressed by the company's products, but appalled by its salesmanship. At the time, he recalls, SAP's marketing consisted of a dense, 100-page brochure. "It was a user's manual," Apotheker says. "I figured if these guys can ever get their go-to-market right they can conquer the world."

Hired to run SAP France, which then had fewer than a dozen employees, Apotheker's responsibilities grew until, in 1999, he became head of SAP operations in Europe, the Middle East, and Africa. He joined the executive board in 2002 with responsibility for so-called customer solutions and operations.

Kagermann also gives Apotheker credit for turning around SAP's all-important U.S. operations in 2002 after sales growth came to a halt. "We had lost sight of the customer," Apotheker says. He's obviously determined not to let that kind of thing happen again.

Ewing is BusinessWeek's European regional editor.