SAP’s CEO, Bill McDermott, quits with immediate effect this month, shocking the SAP community. He will be staying on only in an advisory role until the end of the year. But what will this mean for SAP and its currently Cloud-only strategic focus?
The shock at the announcement came as McDermott’s contract doesn’t actually run out until 2021. With a recent restructuring having only just taken place due to several high-profile resignations, many were expecting the now ex-CEO to give a briefing on SAP’s current strategy.
So why the early departure?
A recent comment on SAP’s Cloud business from the Register says that SAP is reporting Cloud revenue up 37% in its Q3 results, but this is not what we are seeing in the field. This mirrors stories in the press that Oracle has overstated its Cloud revenues as well.
“I believe that both Oracle and SAP are struggling to attract customers to their Cloud ERP offerings, which both require complete reimplementations and the purchase of new licences as part of a SaaS agreement. Also, I question whether Oracle’s Autonomous Database and SAP’s HANA Database can really be doing as well as the vendors would like us to believe, given what we are seeing in the industry as a whole and what our customers are telling us. I believe this market to be much tougher than Oracle or SAP ever anticipated.”Mark Smith, CEO of Support Revolution
Some might argue that this departure is McDermott getting out now with his reputation intact. There’s time left for him to take on one more major challenge before he hangs up his boots for good.
McDermott’s legacy at SAP
McDermott has been CEO of SAP for just over ten years. In this time, he has recruited a new management team, and taken charge of a huge number of corporate acquisitions. He has also steered the company fully towards Cloud, and fundamentally changed the way SAP approaches sales.
This, you could argue, may be why SAP has more than doubled its overall revenues in the past ten years – but at what cost to the brand? While some mourn the CEO as Bill McDermott quits, many see this as a glimmer of hope that SAP may return to a more customer-focused organisation (and away from the hard-nosed sales tactics it seems to have copied from its chief rival, Oracle).
How will this impact you as a customer?
Liz Herbert, Forrester Vice President and Principal Analyst noted:
“Some customers will view this change as refreshing. This is due to issues they have faced and pin on McDermott at the helm. [Issues] related to value for the money, pricing policies including the indirect access issues, and a culture some deem as overly sales-oriented… The change presents an opportunity for SAP to start fresh and move to more customer-centric behaviours in its sales approach and customer support. The change also presents an opportunity for SAP to return to the more product and engineering-centric focus that defined the company for so long.”Computing: Bill McDermott quits as CEO of SAP
As Bill McDermott quits, SAP has reshuffled its senior management, returning to a dual-CEO structure that it was always noted for. SAP executive board members Christian Klein and Jennifer Morgan will step up to the co-CEO role, with McDermott advising until the end of the year.
But is SAP likely to return to ‘the good old days’ of customer service and innovation?
We think it’s unlikely for non-Cloud customers. Jennifer Morgan, who was President of SAP’s Cloud business, is unlikely to be any less gung-ho about SAP’s current strategy. She is likely to want to continue investing more of SAP’s finances into S/4HANA and play chicken with its customers. Meanwhile, SAP is starving customers of investment in support and development until they upgrade.
What can you do if you’re not ready for S/4HANA?
First, remember that 2025 is not a deadline on your products or their licences. If you own your licences in perpetuity then when SAP’s 2025 deadline passes, you can still use your software. The only difference is that SAP will no longer support it.
If you are happy with your current ERP setup, not ready (or unable) to move to S/4HANA, or planning on moving to another supplier – you can still remain supported in the run-up to, and after, SAP’s 2025 deadline.
Third-party support providers like Support Revolution will support your ERP setup, including any customisations, regardless of version or support status. This means you can remain on SAP indefinitely until your business is ready to move.