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SAP Chiefs: Change Underway

Co-CEOs Bill McDermott and Jim Hagemann Snabe promise a significant advance in on-demand applications this year.
The two executives did not budge off SAP's declared intent to raise maintenance fees to 22%, the same as Oracle's, but pointed out that they have kept enterprise maintenance at 18.6%.

The company will nudge the annual fees for higher level maintenance upward until they reach 22% in 2016. An earlier implementation of the new enterprise support costs was forestalled by opposition from the Americas SAP Users Group, which sought two-tiered support and a slowed phase-in of the enterprise level fees.

Asked if SAP would shift toward subscription pricing instead of upfront licenses, McDermott replied that out of 95,000 customers, only 15 opted for such an enterprise-wide annual subscription when given the chance to do so in 2006. The present licensing model was probably the right one until customers showed more interest, he said.

McDermott said the new SAP is about growing through internal innovation and development, not acquisition. SAP would rather develop an ecosystem of partners that enhance its applications and produce software to work with them than produce a stack of middleware and applications that require the customer to buy everything from one vendor. He said the 3M company had recently halted its use of Oracle financial applications and replaced them with SAP's in order to get "end-to-end cash" accounting for a global company.

McDermott is a former senior VP of Siebel Systems and former head of SAP's global sales organization; Snabe is a resident of Denmark who speaks five languages, and is the former head of product development.

Snabe sought to emphasize the increased focus on new product development and said he was glad to be in California. "The innovation that happens in the Silicon Valley is very important to us," he said.

Sikka said SAP has adopted Agile development techniques, like many other companies, and instead of massive projects, has organized development into smaller project segments with regular deadlines, resulting in greater productivity. SAP has about 12,000 application developers.

"We've already started the transition of SAP" into a new company. "The right word is speed ... We want to increase the speed with which can bring new software to customers," McDermott said.

"We want to reach a billion people (end users) with our software," said Snabe. "The way we define innovation is not just new code but whether your software has an impact... How fast can you get it to high volume (of users)."