Commentary
10/5/2010
09:18 PM
Bob Evans
Bob Evans
Commentary

Global CIO: SAP's Sweeping Turnaround: Exclusive Co-CEO Interview

Vowing to create "people-centric software," SAP's retooling for greatly accelerated development, deployments, and time to value, says Jim Hagemann Snabe.



During these times of enormous change and upheaval within the IT industry, as major and midsize players try to outposition each other for the cloud and mobility and analytics and real-time business, perhaps no company is transforming itself more broadly and more deeply than SAP, the former poster-boy for the rigid and product-centric school of IT-vendor strategy.

But even as a slew of acquisitions are reshaping the IT-vendor landscape, and as the major players look to scramble out of commodity and diminishing-value sectors, these daunting challenges that encompass not only technology but also culture and people and branding and reputations and sales tactics can take years to complete.

Knowing that former management had already squandered any such multi-year cushion, SAP co-CEOs McDermott and Hagemann Snabe have spent the past eight months remaking their sprawling company and its vast product lines from the inside out, shredding the traditional SAP approach that I think we could call "Complexity as a Service" in favor of one that puts a premium on customer value, speed to value, and consumability.

To understand the scope of SAP's transformation that co-CEOs Hagemann Snabe and McDermott have undertaken since assuming control of SAP eight months ago, consider these comments from a very recent phone conversation I had with Hagemann Snabe:

  • "Large enterprises have begun to prefer simplicity to perfection—that was not the case before the global economic crisis."

  • "We knew we needed to simplify the consumption of our on-premise offering."

  • "On-demand has become more popular not because customers want to consume software over the Internet but rather because they wanted quicker time to value."

  • "For Business ByDesign, we want to build up a channel that is low-touch: customers are not interested in adding a lot of services to something that's already simple."

  • "Instead of building software for companies, which SAP has always done, we are now designing software for people."

    Those are great soundbites, to be sure, but can SAP deliver on that sweeping promise? Can it revise not only the technology it produces but also the pervasive culture and outlook among its many thousands of developers and engineers whose prior orientation had been totally focused on creating transaction-oriented industrial code whose power was matched only by its complexity?

    Can SAP—for decades the prince of process, the sultan of sameness, the count of conformity—truly become a company that's deeply focused on speed to value, "people-centric software," delightful user experiences, and tailored business outcomes?

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    Co-CEO Snabe says it's already happening through a combination of radically different design processes and objectives plus a new focus away from selling just software and toward selling enduring business value that combines software with unmatched insights into customers' best practices, industry norms, and ways to optimize time to value.

    And he says SAP's "central planning" model is largely to blame:

    "As we spend more time with our customers and users, we notice that while competitiveness of products used to be all about features and functions, it is now focused very much on consumability, consistency, and usability," said Snabe in one of his first interviews since taking the co-CEO job in February.

    "We had become too bureaucratic, with too many boundary conditions—now, instead of trying to force all of our work through central planning, we are allocating people to strategic issues, which yields iteration and speed of innovation that's significantly different: our developers can now spend more time doing rather than planning."

    That sort of approach was wildly out of sync with the new mindset among customers—noted in the set of short comments from Snabe at the top of this column—that has taken hold since the onset in late 2008 of the global economic downturn: "Large enterprises have begun to prefer simplicity to perfection."

    It also mirrors many of the new design initiatives Oracle is undertaking with its new Fusion applications, slated to become available on a phased-in rollout throughout 2011: a focus on modern interfaces and social capabilities, a mandate to mask complexity behind ease of use, and a realization that software written with technical specialists in mind is doomed to fail in the information-rich and deeply collaborative business world of today and beyond.

    Big global companies—as well as mid-size enterprises—simply no longer have the time and staffs to wallow through a multiyear SAP project jammed with endless analyses of every possible combination and permutation and feature and sub-feature and option. So today, instead of looking for SAP to help them boil the ocean, Snabe said, CIOs are now looking for rapid but high-impact improvements in driving revenue, creating products, and squeezing out unnecessary costs.

    "For us to truly become relevant to customers, we need to turn that around and understand their business first and then offer solutions that solve business problems," Snabe said. . . . . With 107,000 customers and all that knowledge, how can we bring to the discussion best practices that put our customers at the level of the best in class by using our software in a particular way? Instead of relying on consultants, we should come in the door with that type of knowledge."

    Two moves the company is making today to convert those plans into reality include an organizational shift that elevates the SAP executive in charge of its value-engineering efforts to head of corporate strategy, and also a product rollout that typifies the accelerated and more-flexible profile SAP wants to adopt.

    On the management side, SAP has promotes senior vice president Chakib Bouhdary to corporate head of strategy, removing the "interim" qualifier that had been part of his title for a while. As leader of SAP's value-engineering program, Bouhdary has been heading up an extremely valuable asset within SAP that I, over the past year, have said can become a source of huge customer value and competitive advantage for SAP.

    I'll discuss Bouhdary's latest exploits in the Value Engineering Group in detail in tomorrow's column but you can get the highlights in this column from exactly one year ago, Global CIO: SAP 2.0 Promises Business Value Over Products: Can It Deliver?, and from Bouhdary's bio on SAP's website.

    And here's an example from the product side: with its on-demand products gaining some traction in the market, SAP is announcing today that its Business ByDesign on-demand products will become the foundation that large enterprises can use for blending on-demand line-of-business extensions into existing on-premise enterprises, and that partners can use to create industry-specific solutions.

    Slated to become available sometime next year, these extensions will help SAP "focus on fulfilling the varying business demands of customers of all sizes," a press release says. One of those on-demand line-of-business solutions for large enterprises is SAP Sales OnDemand, which will be rolled out today and helps large enterprises in "managing their customer relationships and sales cycles on-demand, with seamless integration with their on-premise ERP core," the company said.

    Those two examples of SAP's new focus, Hagemann Snabe said, reflect the company's commitment to offering great technology as table stakes while also significantly raising its bet that it can also "take responsibility for business outcomes with the customer."

    Tell me now—does that sound the SAP you grew up with?

    I didn't think so.

    RECOMMENDED READING:

    Global CIO: SAP Promises Business Value Over Products: Can It Deliver?

    Global CIO: An Open Letter To HP CEO Leo Apotheker

    Global CIO: SAP Stunner: ERP Deal Boosts Customer Profit $100M Per Year

    Global CIO: Tibco Surges And CEO Flips Off IBM, Oracle, And SAP

    Global CIO: The Awesome Transformative Power Of The Apple iPad

    Global CIO: As HP And Oracle Brawl, IBM And SAP Snatch Customers

    Global CIO: SAP Confronts The Real-Time Culture Wars

    Global CIO: The CEO Of The Year Is SAP's Bill McDermott

    Global CIO: Who Is The Tech Sector's #1 Acquisition Target?

    Global CIO: Oracle Hammered By SAP For Stifling Customer Choice

    Global CIO: How SAP Is Leading The Mobile-Enterprise Revolution

    GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

    To find out more about Bob Evans, please visit his page.

    For more Global CIO perspectives, check out Global CIO,
    or write to Bob at [email protected].

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