Software strategies and more…

SAP’s non-renewing of Leo Apotheker’s contract and subsequent replacement with the appointed of Bill McDermott, head of field organization; and Jim Hagemann Snabe, head of product development has raised many questions about SAP, it’s future and impact this might have on customers.

While I don’t pretend to have all of the answers, I do feel this is a positive move for the company, its shareholders and the market in general. Why?

Well as for Mr. Apotheker, he was a great contributor to SAP’s growth for over fifteen years and was key to developing the company into its leadership as a world-class enterprise business applications provider.  It’s most recent focus on sustainability was overshadowed by the controversy of raising maintenance fees and the delays in SAP’s Business By Design SaaS ERP offering. Nonetheless my experiences hearing Leo articulate strategy and his focus on growth never led me to doubt that SAP would continue to grow with him at the helm. I wish him well.

Nonetheless, the markets have changed. The global recession hit everyone hard, but especially the global manufacturing and supply chain sectors. Also known as SAP’s bread and butter. While I have seen SAP successfully win share from Oracle (and others) in finance and energy sectors, they have only begun to grow in the midmarket and lag in areas of collaboration tools and partnerships.

Enter the two rising stars. Since the departure of Shai Agassi in 2007, Bill McDermott and Jim Snabe have both been on everyone’s radar as the heir apparent. Both of these two gentlemen have incredible talents in growing the business (McDermott) and with the new technology trends of the current decade (Snabe).

Given SAP’s focus on competing with Oracle, Infor, Microsoft, and others, having a person like McDermott at the helm promises a very competition and customer savvy change that SAP may very well need – at least in the eyes of many of its customers and stakeholders – in order to remain independent and continue to attract new business. Combine this with Snabe’s technology savvy skills that are crucial to leading SAP’s charge into both hosted line of business offerings for large and midsized organizations – and you may very well have a company ready (once again) to engage its competition with teeth barred.

In my opinion, the real question is the role Hasso Plattner will play in grooming, developing and allowing these two leaders to co-exist and grow the organization.

It’s my opinion to get SAP re-engaged in the eyes of the market that these two leaders must show a unified front, play to one another’s strengths, and manage the corporate culture change that will ensue. Ensuring that top talent continues to grow at SAP all the while being more aggressive in seeking innovation from outside rather than defaulting to home grown whenever possible will be key. SAP must boost its education efforts which have lagged and work to attract more engineers to its platform and promote further integration with industry and role-based technologies.

If I were a customer of SAP, I would not worry about the investments you’ve made. Rather I would look forward to a re-invigorated competitor with two very capable helmsmen. (After all this has worked for Oracle for quite some time.) SAP will be out to prove its business value its software brings, bring new hosted solutions to mid and large organizations so that deployment becomes more timely and effective in helping get the job done, and work more collectively with other market leads in adjacent sectors (collaboration, CRM, unified communications, etc) to give business assurance that interoperability and standards will make it easier for them to deploy and grow.

There has been much adieu about Oracle in the news latest and their promise to deliver a stack. Fellow analyst Ray Wang has a good write up here , and there are other notable reports here , here and here  .

Meanwhile SAP reported down but leveling earning for their fiscal Q4; reports here , here  , and here (as well as many others across the web).

Nonetheless, SAP still remains the top dog in the business software space and is revving up its engines to grow into the mid-market via partners, expand its footprint in BI through its investments in the BOBJ toolset and strengthening partnership with Microsoft and of course driving more value for its enterprise consulting and implementation partners.

But given the nature of large ERP implementations and the strong investments that went on from 2004-2008, can we really expect SAP to continue to drive sales as the level that many investors and technology analysts has grown to expect? Moreover, can SAP keep up growth in an environment where two of its largest competitors are preaching one-stop stack solutions?

My feeling is “Yes”.

However to do so, SAP will have to focus on building go-to-market approach that leverages their installed base and offers them the flexibility to expand via a Software as a Service (SaaS) model. Whilst Oracle wrestles with aligning all the packages it has acquired over the past decade into a suite and Microsoft depends of partners to drive innovation and interoperability across both Microsoft and other partner solutions – SAP should rapidly adapt itself to something similar to SalesForce.com’s Force.com model. Thereby making it easier for line of business needs to be met with ‘cloud-based’ software that has strong integration into SAP’s core solutions and middleware.

SAP must also invest in its mid and lower enterprise sales channels. Over the past 5 years, SAP has done a lot to develop this channel and build competencies in selling to the midmarket industry segment. This channel is now both competent and ripe for the picking by its competitors who can offer them the ability to sell solutions from databases to collaborative tools. SAP needs to reassess its commitment to these partners by either strengthening its own partnership with vendors that can provide incremental business to its ecosystem or acquire some of the emerging vendors that can meet this need – potentially allowing their partners to position leap frog technologies.

SAP also needs to continue to grow its channel business if it is serious in gaining midmarket ground. Microsoft Dynamics has over 10,000 partners globally. SAP is no where near that. Given the softness many tier 2 ERP vendors are feeling (read Syspro, Epicor, Sage) SAP needs to selectively go after some of these companies more established partners. If not, then you can bet that a re-energized Oracle will making it even harder for SAP to grow in the midmarket in the long term.