Vishal Sikka leaves SAP – what’s next?

I consider Vishal a good friend and a mentor so when I heard that he left SAP with immediate effect, for personal reasons, I was deeply saddened. Through Sunday, I pondered the obvious imminent disaster that would unveil – the market cap crash, developers crying in the streets and the collapse of SAP as a company.

Monday came and went, and the world didn’t end, though SAP lost 2% of its market cap. There was however some customer unrest and since HANA is my core business, several of my customers were due to meet with Vishal over coming weeks and many people reached out for advice. I noted my thoughts down on his tenure with Vishal – so long, and thanks for all the fish and sought to get some answers on where SAP is going next.

So this morning I had a virtual breakfast meeting with SAP CEO Bill McDermott, who ironically lives just a few miles away. We drank some virtual coffee and conversed about the direction of SAP with Jon Reed and Dennis Howlett, who have already written their takeaways here. As I said at some point in the call, we aren’t heew to speak ill of the dead and so we didn’t discuss why Vishal left. As Vishal wrote in his last blog whilst at SAP:

Our words, including mine here, are at best half-truths to you the reader. But sometimes words are worse than half-truths, far worse. They are the fabrications of a gossip-monger.

And the reasons for Vishal’s departure are as reported in the media, gossip-columns and world-class hallways of SAP, are probably at best half-truths. Instead, I’ll focus on some opinion and try to answer the questions customers are asking me.

Does Vishal’s departure mean that SAP is now without a technology innovator?

Vishal has a beautiful mind – and Bill himself described Vishal as the “innovator of our generation” in his blog, Accelerating a Culture of Innovation. Some months back I had a lunch meeting with Vishal (by that, I mean we walked through New York eating a slice of pizza) and the thought process that he takes you through in a short meeting is food for the mind for days.

But to suggest that innovation ends with Vishal is an insult to the many people who remain at SAP. During our conversation, Bill rattled off name after name of great leaders at SAP including (in no particular order) Rob Enslin, Steve Lucas, Irfan Khan, Franz Faerber, Michael Reh, Helen Arnold, Bjoern Goerke, Bernd Leukert, Adam Kovalevsky and many others.

Who will replace Vishal?

I don’t think the precise org structure has been defined, but Bernd Leukert has been promoted to the Executive Board and Bjoern Goerke has been moved back into the product team. I believe that these two will run the product organization but there will be a number of other changes. This will play out in the following weeks and will have to be approved by various parts of the organization including the Works Council.

One thing is for sure – Bernd is favored by German User Group DSAG – read the following InfoWorld article for more detail:

“We have been working with [Leukert] a long time,” said Marco Lenck, chairman of DSAG (German-speaking SAP User Group), via email. “He is familiar with the concerns of SAP Users. We are looking forward to tackle with him the challenges of the DSAG members and wish him great success in his new role.”

Will Jim Snabe’s role be extended?

I had noted that Jim had been extended from May until July 2014, and his updated profile on the Executive Board website said he was in charge of Product Development – and wondered whether Jim’s tenure and role would be extended. It’s my understanding from talking to SAP Global Comms that this was a glitch and isn’t the case. Jim will move to the Supervisory Board in July.

Will SAP’s strategy change?

The message I heard from Bill was a resounding “no”. SAP’s stated strategy is to be The Cloud Company, powered by SAP HANA. Bill also talks (though not in our call today) about being the “profitable” cloud company – a jibe at both Workday and Salesforce, who have impressive growth at the expense of profitability.

When asked about platform vs apps, Bill noted that he was looking for a 50:50 split between platform and apps, and both were integral to SAP’s future with customers. He noted that happy customers can be banked and were the primary driver for SAP.

What of the SAP Labs culture?

Vishal had driven a culture of SAP Labs in Palo Alto, Walldorf, Bangalore, Israel, Korea and Shanghai, amongst other locations. We were definitely that some of this would be lost, and much of the amazing innovations I work with come out of those labs including SAP River. Bill was defiant – SAP remains a global company, and the Labs are part of that global strategy and company culture.

Will there be a power shift back to Germany?

It’s not a secret that the blog by German Fanzine E-3 sparked controversy and neither Vishal nor Bill were based in SAP’s headquarters in Walldorf, which certainly has caused some challenges in customers at SAP’s German and European roots. I probed Bill on what was being done to address this.

He joked that he had bought a house in Heidelberg but couldn’t move in until the existing family had left, but this was planned for the first week of July, after which there would be Supervisory Board meetings, a company party and various other strategic activities. He was clear that he is a man of action, and he would show that he is a friend of the Germans. I’ve since wondered if he would learn German, as did the Danish Jim Hagemann Snabe. I know what I’m getting Bill for Christmas!

In addition, Bernd Leukert gets a place on the Executive Board and he is based in Walldorf. So does Rob Enslin, who is South African by birth, but spent a lot of time in Asia and also lives down the road in the suburbs of Philadelphia. Rob really gets culture and knows how to deal with customers in all regions: I’m always pleased when Rob goes to visit one of my customers.

However Bill was clear – Bernd And Rob got their promotions because they are the best people for the job, not because of their location. He cited that if they were American, they would have gotten the job, if they were the best people.

[Edit: May 7th 2014]

The editor of E-3 Magazine, Peter Färbinger, has posted a response on Vishal’s personal blog, which seems to encapsulate some of the sentiment and a lot of the challenge the McDermott must overcome. In this comment, Färbinger cites that Enslin too is going to move to Walldorf, though I have not seen this stated elsewhere so it may be just a vicious rumor.

What happens to HANA?

The biggest concern I’ve heard from customers is that HANA will be sidelined. Here, Bill cited that Bjoern Goerke was building a CTO capability and they were promoting talent from within SAP, but might also look externally for talent. Either way, HANA is core to SAP’s technology platform strategy, as is HANA in the cloud.

My point of view on this is that HANA has already changed with the forthcoming SP08 release, which has very few new features – instead, SAP took the time out to make HANA bulletproof, which is what cloud and Business Suite customers need. I think we’ll see less innovation in forthcoming releases of HANA without Vishal, but more stability. Is this good and bad? Yes.

Who will do the technology keynote at SAPPHIRE and TechEd?

For me, there have been three incredible visionaries in SAP’s history from a technology perspective: hasso plattner, Shai Agassi and Vishal Sikka. I was in a taxi in Tel Aviv a few weeks back, saying I was going to SAP. He responded “Do you know Shai Agassi?”. I said that I’d always wanted to meet Shai – and of course I was being driven by Shai’s driver, who had known him for 20 years. I’m sure the SAP Labs Israel people know who I mean, but the key is: Shai is still revered in SAP, long after he left.

So my perspective is that we will need Hasso to do the technology keynotes at the major conferences, until a new CTO visionary comes to the scene.

What is the big risk to SAP?

We didn’t discuss this in the call, so this is just my personal opinion. The big risk is that the world is moving to the cloud, and SAP has to lead. SAP needs cloud-based software, because cloud software can be made to run on-premise easily for those customers that need it. The reverse is not true, and Salesforce and Workday are already eating SAP’s breakfast and are looking to swipe lunch.

SAP is in the perfect place to take the market – it has the unique RDBMS in HANA, it has 30 years of industry and line of business expertise and a ton of customers. But if the 20,000 SAP developers start in-fighting rather than delivering software, SAP is in deep trouble.

Bill alluded to organizational changes, which are currently unspecified, but it’s clear that SAP needs to cut what I call the “antibodies” – all those people in an organization who get in the way of getting stuff done. This might be easily achieved in the Americas, but organizational change can be exceedingly difficult in Europe where Works Councils and HR legislation have a lot of power, designed to protect the employee. There is an ironic risk that the legislation which is designed to protect the employee could actually be SAP’s downfall. SAP does not have time on its side – something which cannot be wasted on McDermott.

Final Words

It is always a pleasure to spend time with Bill – he is a charismatic leader, and I noted a change in him today. The consummate salesman I have experienced in the past had been left behind, and we experienced a more sober and contemplative leadership style. His goal in the meeting seemed clear: clear up our concerns, answer our questions, listen to what is concerning the market, understand what actions he needs to take.

Bill was clear that he was nurturing a results-oriented organization which would promote those with capability from within – citing Helen Arnold as a perfect example of someone who showed capability and vision and was being promoted to deliver more value. I heard that there was an undertone to this on those that don’t deliver, but Bill didn’t say that explicitly and I don’t want to put words in his mouth.

As for Vishal, he will be missed by us all, including Bill, but time waits for no man – especially in this fast-moving software market. It’s clear that has leadership, direction, vision and Bill plans to drive the company forward to success.

I hope this is an insightful read, and if I missed some key questions, please ask them in the comments below and I’ll try to answer them.