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Friday, May 9, 2014

Could the last executive leaving SAP turn off the lights, please? UPADTED Dec. 2015

LONDON
On-premise revenue is dwindling much faster
than cloud revenue is increasing. How much
longer can SAP afford to dither? 
When it rains it pours, they say. It sure felt that way this week at the world's largest business-software company where a wondering workforce watched as one top executive left after the other. Two and a half years ago I wrote a blog post questioning SAP's acquisition of SuccessFactors ("Acquisition #13: SAP's $3-billion cloud(y) adventure") which I then updated when SAP announced its new cloud HR strategy.
Since then I have been very vocal, both in private to my clients and in public in various forums, about the many issues that SAP is still grappling with on its way to cloud nirvana: to wit,

  1. A reluctance (inability?) to build a payroll based on the SuccessFactors technology (along with other functional holes it needs to plug),
  2.  The confusion raised by the availability of its legacy product (Business Suite) in the (private) cloud as it thus competes with SuccessFactors,
  3.  An absence of how a fully integrated cloud ERP will be developed from the various bits and pieces acquired here and there. 

Customers who already felt confused about the lack of a compelling strategy could be excused for being at their wit's end when watching the accelerating speed at which top executives are leaving the company. The move started exactly a year ago and has been gathering pace since the beginning of the year (see below graph).


UPDATED DEC. 2015




Nothing wrong per se about a top executive deciding to leave their company for "personal reason" as the hackneyed phrase goes. But what SAP is going through is a flood of Noahesque proportions. I cannot remember any other software vendor that has gone through such churn in such a short period of time. And this is happening at the same time when co-CEO Jim Hageman Snabe is relinquishing his post (but staying on as board member.)

UPDATE DEC. 2015: It is only fair to mention that some of these departures have been made up for by the arrivals of well-known executives  Mike Ettling (poached from partner NGA), Thomas Otter (from Gartner and to cover for Dmitri) and my former PeopleSoft colleague Yvette Cameron. Yvette was enlisted clearly as a desperate attempt to plug the hole of Dmitri's defection which will be sorely missed since he had become the public face of the SuccessFactors product, in particular the Employee Central development efforts..

SAP has always been quite unique in the software industry for its two-CEO structure which it brought to an end in 2009 when Leo Apotheker was named sole CEO.  Less than a year in the office he was fired and SAP reverted to its dual management structure. Now, it's back to just one CEO.

For how long?

A software product is not built or sold sui generis. It is the result of decisions made by senior executives, some who become strongly associated with it (like Sikka with HANA) or are the face of it before customers. Every time a software vendor changes the head of a product line or a business customers are justify to wonder what new directions to expect.  It is increasingly obvious that the once great company which brought integrated business software (ERP)  into the mainstream, no small achievement, is adrift with an unclear strategy and a lack of continuity which only stable management can provide. To many observers SAP appears like the proverbial rabbit caught in the glare of (cloud) headlights and doesn't know which way to go. And how to get there.

Should customers be worried? Especially those I deal with on a daily basis: HR buyers? Of course they should. And for three reasons: First, some of these executives had direct responsibility for the HR offering. Second, an overwhelming majority of SAP customers bought the HR module as part of their ERP project. Anything that can affect the ERP product will therefore affect them. Third, SAP's cloud business is still in its infancy and therefore fragile: why should customers adopt SuccessFactors when there is no guarantee that it will be the preferred cloud platform in the future?  An HR buyer wants to put his/her implementation dollars where SAP puts its development dollars. So far, SAP has failed to clarify how it will move to a cloud ERP future. Maintaining and developing multiple platforms is unsustainable in the long run and, until and unless SAP makes up its mind, customers will be very cautious before selecting SuccessFactors.

Or staying with the on-premise solution.

Time for SAP to become bold and display vision and thought leadership. Or face gentle decline.

Could it be that SAP is already dead? And just doesn't know it?


(The blogger is spending a good part of the month in London, the UK being the most advanced cloud HR market in Europe. During his free evenings, he indulges his taste for the theatre and strongly recommends the following two plays: King Charles III, an astonishing Shakespearean political-fiction production; and Blithe Spirit, a Noël Coward farce, starring a sprightly Angela Lansbury. The audience did not seem to be particularly concerned about the fate of SAP - or any other software vendor, for that matter.)