What SAP Needs After Apotheker

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In an e-mail obtained by Bloomberg BusinessWeek that Apotheker sent to SAP's employees on Feb. 7, the departing CEO said: "The pace of change was rapid, probably too rapid for some." He wrote that "my communication toward you was not always optimal and the results of the employee survey did not completely come as a surprise to me…. I regret that I wasn't able to earn the support of each and every one of you."

a sea change in software-selling

Apotheker, a multilingual globetrotter steeped in selling, was the first CEO to lack a technical background in SAP's 37-year history. He succeeded the cerebral Henning Kagermann, a former physics professor. Bruce Richardson, senior vice-president of strategy at software company Infor Global Solutions and a former industry analyst, says Apotheker could be an "explosive" and demanding boss.

His temperament and lack of engineering pedigree may have left him ill-equipped at a time when the computer industry has been undergoing a profound shift. Systems and software are no longer necessarily owned and operated by the companies that use them; software is instead delivered as a service over the Web to a variety of devices, including PCs, smartphones, and new tablet computers such as Apple's (AAPL) iPad.

It will fall to McDermott, a brash sales executive from the U.S., and Snabe, an introspective Dane who rose through the sales and operations ranks at SAP, to position the company to grow again. McDermott is articulate and scrappy. He has been one of few SAP executives willing to spar publicly with Oracle, which has taken market share in business applications through a rash of acquisitions. "Bill McDermott is one of the world's greatest salesmen," says Richardson. "If he's breathing, he's selling." To help on the technical side of the house, SAP on Feb. 7 elevated Chief Technology Officer Vishal Sikka, who works out of the company's Silicon Valley office, to its executive board.

Such large companies as Apple, Exxon Mobil (XOM), Siemens, and Wal-Mart Stores (WMT) use SAP's software to procure goods, plan inventory levels and deliveries, and manage sales and human resources. But customers have put the brakes on purchasing software and related consulting services whose budgets can run into the tens of millions of dollars. "The average age of an SAP system is quite substantial," Plattner said. SAP's 2009 revenue fell 8% to $14.9 billion; net income fell 3% to $2.5 billion. This year the company expects software-and-related-services revenues to increase 4% to 8%.

reworking Business By Design

SAP needs to articulate to customers a clearer plan for delivering new technologies that can save money and make workers more productive, says Forrester analyst Hamerman, who says the company must deliver more software over the Web and let users interact more capably with it through smartphones and tablets. "Those are on the road map but they don't seem to be a priority," he says. "We haven't seen from them a comprehensive technology strategy."

Speeding development of new products could make SAP's software more compelling and persuade customers to upgrade to newer versions. At its Sapphire customer conference in Orlando in May, SAP plans to announce new online software under the Business By Design brand name for customer management, human resources, and procurement, according to McDermott. Once it arrives in the second half of this year, customers will be able to run the software on their own servers, access it through the Web, and run portions of it on mobile devices, he says. SAP has delayed a new version of Business By Design, first released in 2007, as it reworks the software to make it more appealing to small and midsized customers and enables it to deliver updates more efficiently over the Web.

Additional announcements of SAP software for cloud computing and mobile devices will come later this year, according to a person close to SAP. To get the message across, Plattner even plans to deliver his keynote address in Orlando with the help of an iPad.

During the Feb. 8 conference call, Plattner held up Apple as a paragon of the type of "happy company" SAP longs to become again—one that "marches forward at the highest-possible speed without complaining." For an enterprise that is regarded as slow-footed and riven with dissent, the gulf between SAP's present and its co-founder's aspirations would appear to be as challenging as it's ever been.

Ricadela is a writer for Bloomberg BusinessWeek in San Francisco.

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