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Friday, May 9, 2014

Could the last executive leaving SAP turn off the lights, please? UPADTED Dec. 2015/May 2017

On-premise revenue is dwindling much faster
than cloud revenue is increasing. How much
longer can SAP afford to dither? 
When it rains it pours, they say. It sure felt that way this week at the world's largest business-software company where a wondering workforce watched as one top executive left after the other. Two and a half years ago I wrote a blog post questioning SAP's acquisition of SuccessFactors ("Acquisition #13: SAP's $3-billion cloud(y) adventure") which I then updated when SAP announced its new cloud HR strategy.
Since then I have been very vocal, both in private to my clients and in public in various forums, about the many issues that SAP is still grappling with on its way to cloud nirvana: to wit,

  1. A reluctance (inability?) to build a payroll based on the SuccessFactors technology (along with other functional holes it needs to plug),
  2.  The confusion raised by the availability of its legacy product (Business Suite) in the (private) cloud as it thus competes with SuccessFactors,
  3.  An absence of how a fully integrated cloud ERP will be developed from the various bits and pieces acquired here and there. 

Customers who already felt confused about the lack of a compelling strategy could be excused for being at their wit's end when watching the accelerating speed at which top executives are leaving the company. The move started exactly a year ago and has been gathering pace since the beginning of the year (see below graph).

And then there were none
(Updated Dec.2015/May 2017)

Nothing wrong per se about a top executive deciding to leave their company for "personal reason" as the hackneyed phrase goes. But what SAP is going through is a flood of Noahesque proportions. I cannot remember any other software vendor that has gone through such churn in such a short period of time. And this is happening at the same time when co-CEO Jim Hageman Snabe is relinquishing his post (but staying on as board member.)

DEC. 2015 UPDATE: It is only fair to mention that some of these departures have been made up for by the arrivals of well-known executives  Mike Ettling (poached from partner NGA), Thomas Otter (from Gartner and to cover for Dmitri) and my former PeopleSoft colleague Yvette Cameron. Yvette was enlisted clearly as a desperate attempt to plug the hole of Dmitri's defection which will be sorely missed since he had become the public face of the SuccessFactors product, in particular the Employee Central development efforts.

MAY 2017 UPDATE: Mike Ettling throws in the towel. I have little respect for the job-hopping, mercenary corporate apparatchiks so prevalent in the software industry who bring little value but do a lot of damage, if only by stalling and maintaining status quo and stagnation (those who read my book, High-Tech Planet, will remember Frank Dupont, based on a character many have recognized.) Mike Ettling is a notable exception. He was instrumental in bringing SuccessFactors in the Core HR mainstream, and also reduced the gap with Workday in many respects. The fact that he didn't manage to close the gap and, under his stewardship, SAP lost many marquee accounts to Workday (e.g. Airbus, Walmart and a global car manufacturer whose name I cannot mention since I am currently helping them move from SAP HCM and SF to Workday) may be ample proof that the SAP ocean liner is too hard to turn around. Or to use a phrase I have made popular, the dinosaur is dead but is not aware of it. Adam Kovalevsky's departure is another hard blow and will slow down SuccessFactors' catchup efforts with Workday.

SAP has always been quite unique in the software industry for its two-CEO structure which it brought to an end in 2009 when Leo Apotheker was named sole CEO.  Less than a year in the office he was fired and SAP reverted to its dual management structure. Now, it's back to just one CEO.

For how long?

A software product is not built or sold sui generis. It is the result of decisions made by senior executives, some who become strongly associated with it (like Sikka with HANA) or are the face of it before customers. Every time a software vendor changes the head of a product line or a business customers are justify to wonder what new directions to expect.  It is increasingly obvious that the once great company which brought integrated business software (ERP)  into the mainstream, no small achievement, is adrift with an unclear strategy and a lack of continuity which only stable management can provide. To many observers SAP appears like the proverbial rabbit caught in the glare of (cloud) headlights and doesn't know which way to go. And how to get there.

Should customers be worried? Especially those I deal with on a daily basis: HR buyers? Of course they should. And for three reasons: First, some of these executives had direct responsibility for the HR offering. Second, an overwhelming majority of SAP customers bought the HR module as part of their ERP project. Anything that can affect the ERP product will therefore affect them. Third, SAP's cloud business is still in its infancy and therefore fragile: why should customers adopt SuccessFactors when there is no guarantee that it will be the preferred cloud platform in the future?  An HR buyer wants to put his/her implementation dollars where SAP puts its development dollars. So far, SAP has failed to clarify how it will move to a cloud ERP future. Maintaining and developing multiple platforms is unsustainable in the long run and, until and unless SAP makes up its mind, customers will be very cautious before selecting SuccessFactors.

Or staying with the on-premise solution.

Time for SAP to become bold and display vision and thought leadership. Or face gentle decline.

Could it be that SAP is already dead? And just doesn't know it?

(The blogger is spending a good part of the month in London, the UK being the most advanced cloud HR market in Europe. During his free evenings, he indulges his taste for the theatre and strongly recommends the following two plays: King Charles III, an astonishing Shakespearean political-fiction production; and Blithe Spirit, a Noël Coward farce, starring a sprightly Angela Lansbury. The audience did not seem to be particularly concerned about the fate of SAP - or any other software vendor, for that matter.)


  1. Ahmed great insight into what's happening with SAP leadership. Can't agree any better than the opinion expressed. As SAP was getting stable with on premise offerings it suddenly got deflected and don't know where to go. If I am a customer I wouldn't go for success factors until SAP offers a full blown cloud he solution rather than having some in cloud and the remaining on premise.

  2. Very useful post. And very pleased to discover that we're both theater lovers. As such, you may be interested in the Noel Coward Society. I also wanted to share my own post on SAP's lack of a total SaaS next generation strategy http://infullbloom.us/4490/sap-sap-wherefore-art-thou-sap/

    1. Thanks, Naomi. I agree with your analysis 110%. I still cannot fathom why SAP is wasting billions pursuing pipe dreams when the answer was there all along. Nobody has SAP's potential to build the best next-gen ERP and HR product and yet all their efforts are (so far) coming to nought. How sad.

      I'll check out the Noel Coward Society, didn't know about it. I got the theater bug when I lived in NYC and through the years saw some great productions (will never forget Maggie Smith in Oscar Wilde's "The Importance of Being Earnest").

    2. It's very difficult for development organizations that are staffed for incremental innovation on existing platforms to find the product development professionals to build a new platform and application suite again from scratch. The skills and experience to build new product platforms do not exist in software companies living off 10-30 year old product lines. You would need to purchase a development team from a startup that's launched a compelling product and inject the resources into the startup's culture to enable it to produce a new platform and direction for the company. Maybe Instagram purchased by Facebook is close to demonstrating the need for a new independent development group to bring innovation to an incumbent technology company.

  3. Here are two associated LinkedIn discussions in the HR Technology group:

    "CONFUSION: SAP now offers its full ERP (including HR) on the cloud. What about SuccessFactors EC? Are we going to have two SAP parallel HR product lines? Time for a clarification" : http://linkd.in/1ltb8jt

    "Any pilot left on the SAP plane? Relentless flood of senior executives leaving the company is gathering pace and should worry customers" : http://linkd.in/SXTNWv

  4. Kevin Gilroy, one of SAP's top channel executives and one of the drivers behind the software company's expanded sales to small and medium-size businesses through the channel, is leaving the company, CRN has learned.

    An SAP spokesman confirmed that Gilroy will be leaving the company, having decided to pursue other opportunities. The spokesman said SAP would be informing partners of Gilroy's departure over the next couple of days.

  5. Looks like you might need to update this article again with Adam and Mike leaving.


    The only thing constant at SAP is product and executive changes :-)

  6. I'm surprised your overlooked Adam Kovalevsky's departure, a huge loss IMO because he knew how to keep all the bits and pieces humming while working hard to retire the technical debt. I have very high regard for Dmitri, Adam and Mike, and I think their departures are VERY unfortunate.

    1. You are right, Naomi, Adam's contribution should be noted, although with Thomas Otter and Yvette Cameron still remaining (for how much longer?) the blow is a bit softened. Time for them to focus on enhancing SuccessFactors seriously, starting with the data model.