With so much digital ink spilled, much of it hyperbolically, over the management changes at SAP, and with the prospect of more to come, I’ve decided to weigh in on where SAP is today and where it’s heading. If you don’t want to read the whole post, here’s the take home message: plus ça change, plus c’est la même chose.
Let’s start at the top: Management changes are a normal part of business. With former co-CEO and now solo CEO Bill McDermott in charge, it was inevitable that some execs would have to go. What’s important to remember about SAP is that its structure – an executive, a management board and a supervisory board – means that there’s a pretty deep bench that mitigates the loss of any individual, even one as highly placed as Vishal Sikka. Take a deep breath everyone: SAP will soldier on quite well without Vishal.
Expect a focus on finances. As solo CEO at a time of continuing global economic and geopolitical chaos, McDermott has a lot on his plate, but battening down the financial hatches is clearly at the top of the list. So job number one is tightening up on the excess personnel and inefficient processes that have accumulated over the years. Hence some layoffs last week, and probably more on the way – all of which will clear the way for McDermott to hire people where he needs them, not where they happen to have landed following the last acquisition. And you can be sure that Bill wants to look the Street in the eye following his first quarter as solo CEO and prove he’s running a tight ship and improving margins.
Consolidating power also means making sure acquisitions are really acquisitions. The major acquisitions of late – Sybase, SuccessFactors, and Ariba – have had the tendency to act like autonomous entities that are legally part of SAP but either pretend they’re not or pretend SAP was the one that was acquired. (This is an old problem, dating back to the Business Objects acquisition.) I expect to see more layoffs and management changes to reflect the need for McDermott to make sure that, as solo CEO, he’s running a single, unified company.
And you should expect to see more evidence of a one company, one CEO message at SAPPHIRE as well. There are too many examples – HP and Microsoft to name the biggest – of companies that have suffered from an inability to organize around a single brand and go-to-market strategy. I don’t think Bill wants to start his solo CEO career repeating those kinds of mistakes.
HANA, Fiori, Learning Hub, cloud: the innovator’s dilemma at SAP is not “where’s my innovation”, but “how can I execute on all my innovation?” This is a good problem, a very good problem, to have. Executing on too much innovation beats executing without innovation any day (just ask Oracle.) A further reason to acknowledge the legacy of Vishal without bemoaning his departure – unless you thought of Vishal as a detail-oriented execution guy, which means you didn’t really know him.
SAP’s timing on cloud is spot-on. Finally, SAP has come to a new innovation at just the right time. Standalone cloud for the sake of saving capital is giving way to hybrid clouds that need deeper backoffice connectivity in support of deeper business processes than the first wave of cloud providers can offer. Nothing has been sown up for SAP, but its hybrid cloud messaging is resonating with the masses of customers who now, finally, appreciate the inevitability of cloud.
HANA’s success will continue to evolve. It’s clear that HANA didn’t have a particularly great quarter in Q1 – otherwise we would still be hearing about it six weeks after the quarter closed. That’s fine – Vishal’s main problem/attribute is that his reach exceeded his grasp (and good for Vishal… “or what’s a heaven for”, to finish Browning’s famous line), and that goes in particular for his plans for HANA. But no matter, HANA is set firmly in the mindset of the SAP customer base and understood for what it is. It’ll take time to free the collective budgets of the SAP customer base to create a massive uptake for HANA, but if SAP and McDermott can be patient they will be rewarded.
So, from a customer standpoint, I don’t see a whole lot of impact from Vishal’s departure. Product strategy isn’t changing, and in fact, based on what I’ve seen in my SAPPHIRE pre-briefings, things are going to get better for customers in some important ways. For those who bemoan the loss of Vishal’s frankness and openness – and some customers I respect have made it clear those attributes will be missed – I offer the hope that Hasso Plattner sets the cultural norm in that regard, and a frank and open replacement for Vishal will emerge from the seeming void of today. Every good leader needs a voice of truth – or at least apparent truth – to allow the market to vent some steam. I’m sure McDermott knows he has everything to gain by having someone in a senior position building that kind of trust and credibility. And if he doesn’t know it yet, he’ll hear from me and lots of other people about why he needs a point man or woman for this vital role.
For employees, this was far from a warning shot of “more to come”. Of course there’s more to come – standing still is no longer an option for SAP or any company competing in the global economy today. If you want a stable, boring, predictable life, you need to rethink your decision to work for SAP or the entire tech market, for that matter. I know that’s harsh, and something the German works councils don’t like to hear. And I grant them the point. But change – dynamic, and at times gut-wrenching change – is what our industry is predicated on. So, until the revolution comes to upend the status quo, we’re all going to have our guts wrenched on a regular basis.
And this change was predictable – there’s been tons of speculation over the years that McDermott has been grooming himself for a run at the governorship of Pennsylvania, or some such political post. I now realize he’s been grooming himself for a run at the top spot at SAP – and now that he’s arrived, like all new top execs, he’s going to make his mark. So expect more change, it’s part of the process of ushering in new management, and part of the process of surviving in the vicious world of tech.
But also expect some stability in what needs to be a sensible, stable, predictable execution of a myriad new products and strategies that have been cooking in the SAP kitchen for the past decade. It won’t be easy, it won’t even necessarily be pretty, but the real drama at SAP isn’t in the events of the past two weeks. It’s in the events to come, the new products to be launched, the competitors to beat or be beaten by, the missteps to correct. That’s going to provide enough drama to make the recent past seem boring and uneventful. Which is exactly as it should be.