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5/19/2009
06:24 PM
Bob Evans
Bob Evans
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Global CIO: An Open Letter To SAP CEO Leo Apotheker

SAP's plans to connect its operations and priorities more intimately with its customers are great signs, but they're also just the first steps in what's sure to be a long journey.

As I mentioned, at almost exactly the same time as McDermott made that remark, an equally high-level Oracle executive made a similarly tone-deaf public comment about customers and their role in the financial affairs of major IT vendors. I guess you could look at this one of two ways: First, you could convince yourself that it's a good thing because the Oracle remarks will dilute the impact of the McDermott statement. Or second -- and I think this is the more-realistic interpretation -- you could view it through the eyes of your customers who, after seeing those two remarks from top SAP and Oracle execs, could not be blamed for wishing a pox on both your houses. Here's what Oracle co-president Safra Catz said in a conference call with analysts in mid-December about some of the fees Oracle gets from customers -- and pay particular attention to the reaction a customer might have to Catz's remarks:

Question from analyst: Can you tell us a bit more about what drives your margins -- was it rising costs, or currency fluctuations, or some other factor?

Answer from Safra Catz: "Our margins are less about costs than the mix of our business. As we’ve told you all for really a number of years, the large subscriber base -- we have a large number of existing customers already using our software who pay for update rights so they don’t have to rebuy the licenses, [and that] is a very profitable part of our business, and as the number gets bigger and bigger it is really impossible for us to actually spend our way through it, and so in general that is the sort of overriding thing that guides our margins."

I have to admit that this comment from Catz is such a kick between the legs for customers that it almost -- almost, but not quite -- outdoes the McDermott remark. Look again at what she said about customer fees: "… as the number gets bigger and bigger it is really impossible for us to actually spend our way through it …" Perhaps Oracle's customers saw that and thought, "Hey, that's terrific -- although I've had to spend the last six months cutting staff and reducing salaries and hacking my IT budget the bone, it really makes me feel like a winner to know that the fees I pay to Oracle are so excessive that 'it is really impossible' for Oracle to spend it all. Yes indeedy, that's value I can believe in!"

So back to the plans you revealed recently at your Sapphire event to get SAP's operations and priorities connected more intimately with your customers. These are great steps, but in the current economic climate and with the raw feelings that exist around the Great Maintenance-Fee Debate, they're also merely the first indications of progress in what's sure to be a long journey. In that context, I'd like to make a few suggestions based on some of the ideas you shared in your interview with Mary Hayes Weier as reported in her May 13 article, "SAP CEO Seeking 'Clarity' With Customers":

  • "He'll also apply at SAP a best practice known as lean software development, which is intended to make the company operate more efficiently and get employees working closer with customers." SAP, along with Oracle and other enterprise software companies, has a long and mostly proud history of creating great products that underpin the global economy. But your customers today are undergoing wrenching changes unlike anything they've been through before, and not just because of the global recession. The downturn doesn't change your customers' challenges so much as it intensifies them, and that's where your pledge to collaborate more closely with customers in the development process is so vital. Your customers are being asked to help transform their companies from what they had been in the 20th century and the early part of this decade to what they will need to be to survive in the next decade: more responsive and adaptable to rapid and often unpredictable changes in consumer tastes, preferences, buying habits, and experiences. If you follow through with the second part of your promise on lean development -- the part about "get employees working closer with customers" -- you will make huge strides in closing the credibility gap or trust gap that now exists between you and many customers.

  • "I think SAP today is all about enabling clarity and enabling transformation of business, which takes us into a whole different category of applications." Indeed it does, but the history of enterprise software companies is often marked by incremental steps that, in the slower-paced world of the past, was all fine and dandy -- but it's not going to cut it in today's rapidly accelerated business environment. So, while ERP to Supply Chain to Sales Force Automation to CRM to Business Intelligence was a great way to build the foundation, it might not suffice for today's requirements. As you say yourself in the comment above, SAP is focused on "enabling transformation of business," which by definition means that in very short order your customers' needs will be quite different than they are today. Are you helping them get ahead with new tools and new insights that map to what they're becoming? As you go from back-office specialist to customer-facing enabler, are your development teams working on the tools that will be essential in 2010 for companies whose processes, requirements, and IT partnerships will be dramatically different than they are today?

  • "The way people are capable of interacting with the data is going to be revolutionized along the way we showed this morning," Apotheker said. "BI used to be the domain of experts. Analytics used to be domain of experts. That's over." Excellent strategy! But what's next? If your own transformative move here has been to push analytics out to the masses, what are you doing to help them turn that new insight into revenue? Are you giving them the next generation of tools to move beyond automation of internal processes and focus instead on driving revenue? And if not, will your value to them in their post-transformation state be higher or lower than it is now as they make the transformations?

  • "I would love to see SAP's culture to evolve to be even more agile, more responsive, and more customer-centric." Leo, turn this desire into action -- underscore your new role as the company's single CEO by creating a 10-point strategy that's framed in not in the context of a big software company but from the perspective of your customers who themselves are also striving to become more focused on and responsive to their customers; you could call it "SAP's 10-Point Commitment To The Customer-Centric Enterprise." Put it out there, and challenge you entire global organization to make the jump from talking about it to living it, with their jobs depending on it.

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