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Is SAP Imploding?

Shai Agassi brought something fresh to SAP. Young and dashing, he could engage an audience of customers from a stage with the savvy of a marketing exec, yet he was foremost a very smart technologist.

For all his charm, Shai also carried an air of impatience, and I think he started planning his departure in January, right around the time SAP's board decided to keep 59-year-old Henning Kagermann as CEO for two more years. At just 38, Agassi was president of products and technology at the world's largest ERP software vendor. Chairman Hasso Plattner indicated in a statement that he wanted to make Agassi CEO, someday. I don't think that was enough for hyper-ambitious Agassi.

It may seem odd timing to announce Agassi's departure just after Oracle sues SAP for allegedly stealing company secrets. Maybe SAP prescribes to the Band-Aid approach -- pull off any disruptive news about the company in one quick yank so SAP can move on, get to the business of responding to Oracle's lawsuit, and start preparing for its Sapphire user conference in Atlanta next month. (In keeping with trying to be more young and hip, SAP hired pop artist John Mayer for the evening entertainment.) Still, investors are understandably concerned about all this drama at the normally stoic German software maker. In the past day, its shares have dropped as low as 32.83 euros, the lowest point since May 2005.

Is SAP imploding? I don't think so, but there is plenty to be concerned about with what's going on at SAP. Besides the embarrassing and potentially damaging Oracle lawsuit, SAP faces the most competitive software market landscape ever. While Oracle is trying to dominate through acquisition, SAP has taken a different tack, trying to create an ecosystem around the NetWeaver architecture Agassi oversaw development of that will let smaller software partners link in through Web services, thereby opening up all sorts of new applications to customers without having to actually go out and acquire them. Agassi has argued that while it forges ahead with NetWeaver, acquisitions keep Oracle from making any real progress with its own Web services architecture, Fusion. It's an interesting approach, but it's been hard for SAP to get customers to digest such an ambitious vision. Oracle customers, meanwhile, just sit back and watch their vendor proceed with its strategy for world domination.

And therein lies the problem. Agassi is young and dashing, but he always led the product and technology strategy like a tech guy with big, tech guy visions. By comparison, you have Charles Phillips over at Oracle, who isn't as verbose as the seemingly absent Larry Ellison in his approach to software domination, but Phillips is just as Gordon Gecco-esque in his own quiet, calculating, and lethal way. When Oracle acquired Hyperion, it was just one more step in a determined effort to gain ground on SAP, while SAP has tried to keep the high road and its eyes on its NetWeaver vision.

Agassi did a lot of good things for SAP. Probably most important, he led the company into a new Web services framework so it can began to move away from costly, unmanageable ERP deployments. The leadership remaining will need to keep beating the drum on that vision, while at the same time finding a way to be more cunning, even ruthless, in a software market where Oracle-the-shark is its top competitor. Good luck.

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