Global CIO: Inside SAP: 10 Factors Behind Its Dramatic Turnaround
Here are 10 ways SAP's new leaders have reinvigorated the company, redefined its strategy, and reestablished the primacy of its customer.
3) Making mobile matter. Outlining SAP's new "on-device" approach on the earnings call, Snabe touted the company's intensified focus on mobility: "Mobile devices are becoming the preferred interaction point with business applications. We want to make sure that SAP solutions can be accessed from all leading mobile platforms, like RIM, Nokia, Apple, Google Android, etc. We are building and delivering mobile applications on these platforms."
4) Great expectations for Business ByDesign. Promising to have its long-awaited SaaS platform available in volume by "mid-year," Snabe said SAP intends to compete aggressively against a wide set of smaller companies that have dominated the market for SaaS in the enterprise: "We have worked hard to ensure that the technology platform in SAP Business ByDesign is not just a me-too, but in fact a next generation on-demand platform," Snabe said on the call. "We believe that there is an opportunity for us to disrupt the on-demand market with this platform." McDermott expanded on that in the phone conversation we had after the earnings call, saying that the enterprise SaaS sector now resembles the on-premises space from 10-15 years ago with "lots of point solutions from lots of smaller companies. But when the big companies started to develop suite applications, the suites started to win. In the same way, we're saying this is a new game with new providers, and we think we can deliver to customers everything they need from supply chain to CRM," which McDermott said means better data integrity, less integration, less risk, and less complexity.
5) The rise of analytics. Snabe told analysts that "with the acquisition of Business Objects, we have also taken the lead in analytics, as recently demonstrated by Gartner." McDermott noted that SAP added lots of new customers for analytics and the overall "business user" sector of which analytics is a part, with sales to new customers making up 37% of that sector's revenue for the quarter.
Five Reasons From Co-CEO McDermott.
1) The return of transformational deals. "We also saw a return to some large transformational deals that deals over 5 million euro, which accounted for 27% of order entry compared to 12% in last year’s first quarter," McDermott told analysts. "And the average deal size was up 36% year-over-year."
2) Double-digit growth: broad and deep. On the earnings call, McDermott cited "our return to double-digit software and software-related services growth in Q1" across all geographic regions and "in our small and mid-sized enterprise business, in SAP Business Objects, and in our focus industries." And that momentum is continuing into the future, McDermott said on the earnings-call transcript: "There is in fact a strong pipeline for Q2 and the remaining quarters."
3) Enabling business-driven CIOs. In our phone chat after the earnings call, I asked McDermott to describe the Number One objective that CEOs express to him: "Growth. They need to grow—every company we talk to says that. And the higher you go in the organization, the more you see that growth is back on the agenda and is the major topic of discussion. Everyone is looking to create the right plan or agenda to grow, sometimes directly in the industry they're in, and sometimes out into new businesses, sometimes within their own established ecosystem or sometimes out," McDermott said. "And I have to say that with respect to CIOs, we have tremendous respect for them and their management and IT overall—but the business world has reached the point where if you can't have a conversation that goes way beyond technology stacks to roadmapping business strategies and creating growth, those CIOs are just not gonna be relevant... For any IT project, hitting budget is okay and finishing on time is okay but what decision-makers really want is value--they want to know that these IT projects are going to steadily increase the company's ability to grow."
4) Regaining customers' trust. More than 90% of enterprise customers are choosing to buy SAP's top-end enterprise-support package, McDermott said on the earnings call, which he described as a huge sign of trust in SAP and its capabilities. He also pointed out to the analysts additional evidence of renewed trust from the investment community: "Our public bond offering in Q1 was significantly oversubscribed."
5) "Knockout" deals against major competitors. While McDermott didn't identify Oracle by name in describing a series of huge competitive wins in the quarter, he also did not deny that it was Oracle whose products got ripped out and replaced by SAP's at 24 customers. "We also had some large competitive knockouts in the quarter—but I can't mention any names. We had 70 significant competitive wins, and of those, 24 were literal replacements of competitive installations."
Looking back on the ills outlined 11 weeks ago by chairman Plattner, it appears that Snabe and McDermott have delivered on the strategy and execution needed to address each of those significant problems. For the new co-CEOs, so far so good.
Bob Evans is senior VP and director of InformationWeek's Global CIO unit.
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