SAP Seeks Happiness

It's been a dramatic week for SAP, whose software runs the operational underpinnings of some of the largest enterprises. The company shook up its executive suite, replacing CEO Leo Apotheker with co-CEOs Bill McDermott and Jim Hagemann Snabe. SAP today also disclosed the departure of former SAP CEO John Schwarz.

Listening to founder and chairman Hasso Plattner speak on Monday during a press conference that was webcast, it was a day of reckoning for the company to acknowledge its missteps and apologize to its customers for gouging them.

Those weren't his exact words but he tacitly acknowledged SAP has to find a new engine of growth besides imposing heavy maintenance and licensing fees. "We are a public company, and profit is everything," Plattner said. "But in order to be profitable, it needs to be a happy company. I will do everything possible to make SAP a happy company again. And in order to be profitable and please the shareholders, we have to focus on our customers, and we have to make the customers and their employees happy, as well."

During the Q&A portion of the call, a reporter asked if Plattner was acknowledging that SAP was an unhappy company. Clearly resenting the question, Plattner responded, "Please don't turn it around that we are unhappy. Take it that we have to be happier. Happy companies are companies who enjoy their success, their strategy, and are marching forward at the highest possible speed without complaining. SAP has the capacity, has the strategy, has the development on its way, and it takes unfortunately some time with our huge customer base."

Forrester Research analyst Paul Hamerman said in a blog post that Plattner said the right things. "He's got this right: taking care of your customers makes your company successful. Forcing profitability via price increases and sales tactics is not a sustainable recipe for success," he wrote.

True happiness for SAP, of course, will come when it can -- among other things -- address its stalled cloud strategy. The company launched its Business ByDesign, a SaaS-based application suite, in 2008 but angered larger enterprise customers by saying it was targeted at organizations with 100 to 500 employees, according to a research alert released by Saugatuck Technology today.

"SAP's strong prevailing culture and its need to protect its R/3 cash flows fundamentally forbade the company from pursuing offerings that could replace it," the report said.

I spoke with one of the report's authors, Saugatuck founder and CEO Bill McNee, who described four challenges facing SAP.

The biggest changes SAP must face are cultural. "They have a very significant cultural transition where they have focused historically on the large enterprise customer almost to a fault and a legacy around the big deal, to a technology-not-invented-here syndrome," McNee said.

Second, the company needs to accelerate cloud strategy. "They need to better articulate their cloud vision," he said.

Third, the company needs to figure out how to bring forth the right technology and monetize it.

And finally, if SAP really wants to succeed in targeting the small and medium business market, it needs to come up with an accelerated go-to-market strategy. That also means shedding its legacy of primarily selling direct to customers. "SAP has less experience building partner networks that will enable them to succeed in the small to medium market," McNee said.

If SAP is successful with its Business ByDesign offering and building up a partner eco system, it is likely to butt heads with Microsoft's Dynamics business, McNee said. "Microsoft's channel should stay alert to changing customer requirements, and evolving offerings from Microsoft, going forward."

What will it take to bring happiness to those buying and selling ERP, CRM and other business solutions? Share your thoughts by droping me a line at [email protected].

Posted by Jeffrey Schwartz on February 11, 2010