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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.

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21 Comments

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  1. Peter Chen

    Thanks a lot for a great blog, John.  Your usual self.

    A power struggle nevertheless, however we want to paint it.  Unfortunate outcome made worse by the timing.

    As an outsider, I do see an identity criss SAP is experiencing: it can choose to be, and may still have a large part,  which is “boring” and chugging along, aka Microsoft and Oracle. 

    Since the outster of Leo, we also see the new and vibrant SAP, which put innovation and product development at the forefront.


    From this side of the geek river, I love the new open SAP: enjoyed all of the roadmap presentations, partner testings, influence councils, and interactions with the SAP solution/product owners. 


    Yet, in real project life cycles, we still have a face the same old giant, with the “famed” account executives and unresponsive supports….

    For a traditional ERP vendor, which now has Analytics sitting front and center, SAP has to be experiencing a major transition of mindsets and political landscapes…

    In any case, I hope this is not a case of cutting the head off so the tail can catch up…certainly prefer not to see d-code conference reverting back to more sales gimmicks than substance.

    d-code rewinding back as techEd….that will be fine. 😉

    thanks again.  Always enjoy your writings, John.

    peter

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    1. John Appleby Post author

      Thank you – I try to be me.

      I’m just not going to comment on Vishal’s departure – for reasons of gossip, non-disclosure and ethics. In every organization, there exist egos, personalities, politics, power struggles and other battles. Don’t believe the stories, they are best half truths.

      SAP, and McDermott have been extremely clear this year – they look to move to the cloud, which brings sales process changes, and they look to resolve the support problems which continue to plague them. Bill claims to be a man of action and the community should hold him to account.

      I did want to touch on developers – Bill told us he wanted to get closer to the development cycle. I don’t think he intends to micromanage, but rather to understand, and I know of instances where he got involved with the developer ecosystem in the last year, to the benefit of customers. He is well known for being a man of his word amongst customer circles.

      But there is a development father figure missing from SAP now Vishal has gone and we need this gap to be filled.

      Hope this adds some color.

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  2. Muthu Ranganathan

    Thanks John, as being a great ambassador for SAP. Liked your comment on our CEO : “a more sober and contemplative leadership style”. Truly agree !

    regards

    Muthu

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  3. Andy Silvey

    Hi John,

    as ever, an excellent information and thoughts sharing from your side.

    For many, myself and friends included, it was a sad day when Shai moved on to other things.

    Shai had a long term vision and passion for amongst other things, separating the presentation layer/UI from the business logic layer, which somehow got lost after his departure when UI applications moved back on to the backend systems.

    For me, the business suite has lacked a cohesive long term vision and strategy over the last 5 or 6 years, with many ways to crack a nut resulting in a confused customer base worried which horse to back, which horse will still be around in a few years time.

    It is understandable that Hana has taken a huge amount of SAP’s collective energy over the recent years at the expense of other areas, and I would agree, Hana needed to be invested in and made as robust as possible in as short a time as possible.

    As Hana moves towards maturity and stability and the standard database for SAP on-premise solutions, then at the same time, SAP needs to ramp up the attention to the cohesive strategy for the business suite.

    Cloud is indeed a huge potential pillar for SAP and instead of just shouting about how great the cloud is, SAP need to be shouting more about how they will help their customers get to the cloud.

    Let’s hope we get another strong visionary with a long term cohesive strategy.

    Best regards,

    Andy.

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  4. Jon-Paul Boyd

    Never in 16 years of SAP development have I known such a time of technical advance, openness and opportunity as UI5, River and Fiori converge with Hana.  That’s an incredibly powerful ecosystem.  Having taken a calculated risk in tracking my career Hana bound I trust that SAP won’t drop the ball during this organisational change.

    Unfortunately I never had the opportunity hear Vishal speak in person, however I understand the power of a charismatic and inspirational leader so feel the loss.  What stands out for me in your piece is the danger of “in-fighting” and the need for continued focus with effective leadership to drive these wonderful innovations onwards to market and profit.

    Thank-you for sharing this insight with the community.

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  5. William Newman

    John, great wrap up +1!

    Some of my perspectives …. I’ll simply comment here rather than push out more blog posts.

    Vishal was a unique entity inside SAP.  However he often sacrificed process in favor of his genius and this can be sorely misinterpreted in a German company where process and controls are paramount and valued.  At SAPPHIRE last year he decided to have a spontaneous demo of one of the new HANA apps after his keynote – do you guys remember this?  Becher was almost at his wit’s end.  Vishal announced on his way to the analyst stage “we do a demo whenever we can, always a demo.” Johnathon B and I are Twitter messaging …

    Me: Is Vishal really going to spontaneously demo?

    JB: No, there will be no demo.

    As brilliant as Vishal was (and still is, he will disrupt and advance anything he touches next) he was unpredictable inside a large, corporate German organization.  That’s not how you become CEO and that’s not how you stay on a board of such a company.

    I don’t see this as a cultural battle, like what ousted Shai.  But I do see this as a clear signal that even though an American will be at the helm in a few weeks, SAP will remain a culturally German organization with global influences.  Not the other way around.

    Best….

    Bill

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    1. John Appleby Post author

      It’s definitely true that Vishal eschewed process – I remember when he invited me to come and do the F-KOM keynote with him in Singapore – the day before. I had to write my demo and my keynote on the plane! A Vishal keynote was an extreme stress to those around him.

      But this was what made Vishal real to the developers and customers alike. In d-code in Palo Alto, he made up demos on the spot, to the rapture of the developer audience.

      I think it’s certainly fair to say that this lack of respect for process could at times alienate the Walldorf community. But SAP needs some of this. If it continues to produce ERP 1.0 software, SAP will become irrelevant.

      One of the real losses of Vishal is may be to lose some of that spontaneity. It’s real, and customers believe real.

      I think you are quite right on the culturally German company. Those who haven’t worked closely with SAP haven’t experienced how everything is a process, and to manage change at SAP, you have to learn, understand, work with (and bend) the process. You can’t just break the process and if you do, someone has to pick up the pieces.

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  6. Frank Scavo

    John, I just read the comment from Peter Färbinger on Vishal’s blog post here:

    http://vishalsikka.blogspot.com/2014/05/words-and-wisdom.html?showComment=1399366946330#c7692591043070546722

    All I can say is, substitute the words “US” and “American” for “Germany” and “German” and imagine the blow-back from around the world.

    I understand that Färbinger is not an SAP-insider, but if his attitude even partially reflects opinions within SAP, there is a very deep-seated problem indeed.

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    1. John Appleby Post author

      Frank – nice addition to the conversation.

      The conversation on this has been very interesting, and many people spoke out against Färbinger. Here are a few.

      “These comments go from bad to ugly”

      Three comments does not a majority make, but it shows part of the story.

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  7. Harris Veziris

    Bill is right. As much as Vishal is a loss for SAP, there are a few people that can fill his shoes. I personally believe that Irfan Khan (formerly of Sybase) has all the qualities of a C-class level executive and could eventually elevated to a Steve Jobs-status.

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    1. John Appleby Post author

      Yes Irfan is a good friend though he currently works in the sales side of the house, for Steve Lucas. It’s not inconceivable he will migrate back over to the technology side of the house, though I can’t speak to his personal goals.

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  8. Bill McDermott

    Great analysis, John! I spent some time in Palo Alto last week and have tremendous personal confidence in the individuals who are stepping up to bigger leadership positions. The questions from our colleagues during the all hands meeting were impressive – this development organization is world class. I also believe the framework of innovation-to-execution with Bernd Leukert and Rob Enslin will be a big positive on all fronts. Thanks for being so thoughtful and constructive, as always.

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  9. Poltera Anthony

    SAP is a fantastic company however a certain arrogance (and desperation) came out in Hasso Plattner’s keynote address at SAPPHIRE. Bill McDermott has his back against the wall on this one. Losing Vishal Sikka and pulling SAP back to Germany is not good no matter which way you want to colour it. Shai Agassi started an expansive era of innovation, openess and unbridled growth for SAP. Vishal Sikka took these reigns and filled very big boots when Shai left but he did step up to the plate and I agree with you John that he has left SAP with unfinished business. I wish Bernd Leukert and Rob Enslin the best and I hope they can work with Hasso and SAP’s giant ego. Vishal you are a humble visionary, thank you.

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  10. Stefan Koehler

    Hi John,

    “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.”

    Is this just your personal opinion or is it also based on some (internal) information? I am just wondering as SAP took the time to make SAP HANA bulletproof (right now), but Vishal announced it in May 2013 as “mission-critical / enterprise ready”. If the database was not bulletproof in May 2013, then it was nothing for mission critical customer systems / applications until yet, right? Kind of curious, isn’t it?

    Regards

    Stefan

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    1. Xiaogang Pan

      I guess everyone has different opinion on “mission-critical/enterprise ready”. I used to work for a bank and in their mind only Tandem is classifiied to meet their “mission-critical” requirement.

      As a SAP customer, HANA still has lots to do before we can call it “mission-critical”. I am looking forward to see how the “framework of innovation-to-execution” can help both customer and SAP in future.

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    2. John Appleby Post author

      Yes, my personal opinion based on what I hear from the people I’m working with and customers. This is borne out with the HANA SPS08 release: http://scn.sap.com/community/hana-in-memory/blog/2014/05/31/whats-new-in-sap-hana-sps08

      Mission critical, as Xiaogang says, is a relative thing. HANA Revisions 69.x and 74 are very good, and we expect 80 to take it to the next level.

      Different customers with different cultures will have a different perspective on what Mission Critical means.

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