SAP's Surprising Spring

It was only a few months ago—February, to be exact—that SAP Chairman Hasso Plattner issued a public plea for customers to maintain trust in the floundering German software giant. By May, however, SAP had made that desperation seem a distant memory—an amazing feat, considering Plattner’s appeal capped a period in which SAP ousted its chief executive officer, saw its chief operating officer leave for health reasons, and extended the long wait for the already-long-awaited on-demand product Business ByDesign (BBD). 

“Morale in the company was low,” says Esteban Kolsky, founder and principal of consultancy ThinkJar. “There was no vision. There was no leadership. And it wasn’t [the previous CEO’s] fault. The company had been accumulating problems through the years [before his tenure]. He was unintentionally set up to fail.” 

In the wake of Plattner’s February plea, SAP was facing more questions than it could answer. Could the new co-CEOs, Bill McDermott and Jim Hagemann Snabe, really function as a team? Would the company initiate a sensible and effective strategy? Would BBD ever be released? The industry expected the answers would come (or not) at the company’s annual user conference in May—rebranded this year from “Sapphire” to “Sapphire Now”—and SAP would rise or fall based on its announcements there. 

But the turning point actually arrived a few days early, on May 12, with SAP’s acquisition of Sybase, a provider of mobile software, for a reported $5.8 billion. Though some analysts suggested that SAP had vastly overpaid, most praised the deal, which turned out to be a cornerstone of the strategy SAP would reveal at Sapphire Now: The future of the industry, the company declared, would be mobile and in-memory computing. 

Kolsky calls the Sybase deal “a show of force,” and says SAP was “taking charge and showing people that they were doing what they thought they needed to do.” Joshua Greenbaum, principal at Enterprise Applications Consulting, called it “a pretty serious salvo across Oracle’s bow… [and having] the ability to do mobile, and to go into these vertical industries more concretely, is a definite attack on Oracle.”

McDermott—whom we’ve named one of this year’s CRM Influential Leaders—may have fired another salvo himself. “Both of our companies are excited about this because it is focused on growth,” he said at the May 12 briefing. “Not like other acquisitions we’ve seen in northern California where 21,000 jobs have been cut and people have been demoralized”—a jibe clearly targeting the purchase of Sun Microsystems by industry rival Oracle. Even though reports in The New York Times suggest the number of jobs lost as a result of the Oracle/Sun deal may be closer to 10,000, McDermott’s comment was more than mere trash talk; it had the feel of an end-zone celebration.

McDermott had other reasons to celebrate that day: “We are launching Business ByDesign at Sapphire,” he declared during the May 12 call. “The product will be available by July.” (In late June, Mark Oakey, an SAP vice president for BBD, told CRM magazine that the availability date had been pushed to August 1; he also noted that a BBD 2.6 release is slated for early 2011, followed by twice-a-year upgrades.)

Sapphire Now began just days after the Sybase deal, and a joint keynote by McDermott and Hagemann Snabe provided ample evidence of the co-CEOs’ compatibility. After just 99 days sharing the helm, the two delivered a perfect transatlantic back-and-forth via satellite, with Hagemann Snabe cogently fielding technical questions from Germany and McDermott filling the role of visionary from the stage in Florida. 

“What we set out to do with Business ByDesign was to change the current rules and offer a more modern infrastructure,” Hagemann Snabe said at the event. “Today we already serve approximately 100 customers. Business ByDesign is a real product.” What Hagemann Snabe didn’t say was that it’s a real product that SAP admits to having designed on the wrong architecture. In the original single-tenancy model, each customer had an instance of the software installed on its own assigned server. Sending updates to all those servers was inefficient, which meant SAP’s business model couldn’t scale. SAP says re-architecting the system for multitenancy corrected the issues. 

“The Business ByDesign 2.5 release really brings forward some of the manageability capabilities SAP wanted to deliver,” says Paul Hamerman, vice president of enterprise applications at Forrester Research. “They’ve added a lot of features that readies it for more scalable adoption. They still have some challenges…but the breadth of the offering is differentiated from a competitive standpoint.” 

Has SAP really turned a corner? That remains to be seen. Hamerman and Kolsky each say they’re optimistic about SAP’s new focus and direction. But until BBD is fully released and users have really worked with the software, we can’t be sure the SAP on display in May was any different than the February one.

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