A fresh take on SAP’s strategy under the new Co-CEO’s

March 20, 2010
138 Views

I attended a roundtable Monday with SAP’s new co-CEO’s, Bill McDermott and Jim Hagemann Snabe to get an update on their business strategy. SAP has had a few rough years and was hit especially hard by last years recession. They have taken quite a bit of criticism over their slow to execute cloud strategy and their attempts to push customers to a higher tier maintenance offering by eliminating lower price options (and subsequently re-instituting the basic tier). I won’t rehash those issues here though, instead let’s look at what we discussed at the meeting this week.

Moving forward SAP’s product strategy is based on three pillars:

1. On demand – Both executives basically reiterated the on demand strategy that was outlined at the SAP analyst summit in December (see this post). The most obvious shift though, is the level of prominence the message gets from the executives and that customers will probably buy / deploy in hybrid models. According to Snabe the next release of Business by Design (ByD), version 2.5, which is supposed to be the “ready for general consumption” multi-tenant release, will be available in…

201003161056.jpg I attended a roundtable Monday with SAP’s new co-CEO’s, Bill McDermott and Jim Hagemann Snabe to get an update on their business strategy. SAP has had a few rough years and was hit especially hard by last years recession. They have taken quite a bit of criticism over their slow to execute cloud strategy and their attempts to push customers to a higher tier maintenance offering by eliminating lower price options (and subsequently re-instituting the basic tier). I won’t rehash those issues here though, instead let’s look at what we discussed at the meeting this week.

Moving forward SAP’s product strategy is based on three pillars:

1. On demand – Both executives basically reiterated the on demand strategy that was outlined at the SAP analyst summit in December (see this post). The most obvious shift though, is the level of prominence the message gets from the executives and that customers will probably buy / deploy in hybrid models. According to Snabe the next release of Business by Design (ByD), version 2.5, which is supposed to be the “ready for general consumption” multi-tenant release, will be available in July. Snabe also stated clearly, for the first time that I know of, the reason SAP struggled with ByD was the shift to the agile development methodology from its traditional waterfall methodology. He also states that now that the shift and methodology are working and the company plans to switch all development teams to agile. In true SAP bold marketing form both execs claimed that SAP will become the leader in on demand apps and that ByD is the most complete and feature rich ERP on the market (when v2.5 is released, that is).

2. Mobile – In an acknowledgment that mobile is gaining prominence in the enterprise as an acceptable desk top replacement both executives indicated that SAP is working on an “any device” strategy for all of its apps. This fits well with what we at IDC have predicted about the accelerated shift to utilizing mobile devices to interact with enterprise systems beyond just email. While light on information at this event I’d expect much more detail around this pillar at the upcoming Sapphire conference.

3. Orchestration – Snabe talked a little at a high level about SAP’s renewed focus on Master Data Management (MDM), overall lifecycle management, and delivering the lowest TCO for customers across hybrid deployments. This is certainly a key topic for companies deployed in hybrid models both across different vendors and different delivery models, something that is definitely increasing.

and three delivery models:

1. On premise

2. On demand

3. On device

The word of the day was “innovation”, a term that both executives used repeatedly and in several different situations. Snabe defined innovation as the level of creativity multiplied by your companies scale in the market and McDermott stated that “innovation isn’t just how you build a product, it’s every bit as much about people”.

Continuing with the innovation theme when asked about SAP’s acquisition strategy going forward, they pointed to the Business Objects acquisition and stated that acquisition would be used as a strategy to “increase the speed of innovation” not to just buy growth.

In the hybrid business model that SAP is moving into, go to market strategy will be extremely important and the clarity of approach will need to be messaged carefully both internally and to partners. When asked how SAP will sell on prem and on demand products the answer was that it would be based on customer choice. McDermott indicated that SAP will sell on demand direct, on the web and through its channel. The ecosystem will undoubtedly want more detail around that answer.

A few other observations: SAP is still very focused on one competitor. As an executive team they are trying to “dramatically simplify things so everyone knows what to do”. The one thing that is clear when you talk to SAP employees is that attitudes are much improved and the workforce seems much more motivated now. The focus of this meeting was more on high level strategy and not on technology but they did of course briefly mention the perceived advantage that their in memory processing developments will have in the marketplace.

The real question is can SAP execute on these plans and will it be enough to change their current trajectory? Expect much more detail around this strategy in a couple of months at SAP Sapphire.