SAP Chiefs: Change Underway

Co-CEOs Bill McDermott and Jim Hagemann Snabe promise a significant advance in on-demand applications this year.
SAP AG put on display at its lab in Palo Alto, Calif., Monday to show the results of its reorganization in early February. Bill McDermott and Jim Hagemann Snabe, the co-CEOs replacing former CEO Leo Apotheker Feb. 7, outlined SAP's future path.

Snabe had just flown in from Frankfurt and appeared to be the target of a quip that the pair was so exicted about the task front of them that they hadn't been able to sleep.

The duo, sitting on raised chairs in front about 24 analysts and members of the press, quickly got down to business: the new SAP is about producing on-demand as well as on-premises applications; it is about adding intelligence to those applications through analytics; and it is about orchestrating the use of business software for better business processes and more efficiently running enterprises.

"We have almost 50,000 people fired up and ready to go, and so are we We haven't stopped. We haven't slept," said Snabe.

Before they'd gone too far, the pair displayed a spirit of teamwork, with McDermott handing off a microphone to Snabe so he could talk first, and Snabe handing it off to an aide because both he and McDermott were already wired with mikes.

Then McDermott testified to the friendship and partnership he and Snabe have built over eight years of working together. They got acquainted, he noted, while serving on the SAP Executive Committee.

"There will be a significant advance in on-demand applications this year," said Snabe. SAP orients its on-demand applications toward small and medium business (SMBs) and offers applications in CRM, financials, HR, procurement, supply chain and project management.

But some large customers may choose the online applications as well, and the two will be integrated further to better work together. "We believe in the hybrid approach, both on-premises and on-demand," Snabe said.

When asked during a question and answer session how SAP would respond to Oracle's rate of acquisition, McDermott said there are better ways to grow a company than acquisition. SAP will acquire companies only when it makes compelling strategic sense to do so, he added. SAP wanted to provide broader access to application analytics, and its Business Objects acquisition is helping provide it.

"I wouldn't hesitate to do an acquisition if it was strategic. We wouldn't shy away from it," he added.

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)."

Editor's Choice
Sara Peters, Editor-in-Chief, InformationWeek / Network Computing
John Edwards, Technology Journalist & Author
Shane Snider, Senior Writer, InformationWeek
Sara Peters, Editor-in-Chief, InformationWeek / Network Computing
Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
John Edwards, Technology Journalist & Author