SAP shakes up executive suite

CEO replaced by co-leaders as firm struggles with financial performance

SAP replaced its CEO Leo Apotheker with two co-chief executives, the company announced on Sunday.

The move follows criticism that SAP's maintenance fees have been untenable and that the company was slow move toward software-as-a-service. SAP is among the largest suppliers of enterprise software.

The two new co-CEOs include Bill McDermott, who headed the company's field organization, and Jim Hagemann Snabe, head of product development. Founder and Chairman Hasso Plattner will play a more active role in product development, company officials said.

Former CEO Apotheker's contract was up for renewal. Given the company's poor financial performance, his departure was not a major surprise, according to analysts. Overall revenues declined 9 percent in 2009 and software licensing was down 28 percent. While rivals also struggled last year due to the overall weak economy, SAP also faced angry customers.

"SAP really has not been treating their customers very well," said Ovum analyst Tony Baer. They were turned off by mandatory upgrades, increased maintenance costs and aggressive sales techniques, said Forrester analyst Paul Hamerman.

For example, since acquiring leading business intelligence platform supplier Business Objects in 2008 for $6.8 billion, SAP has attempted to push those products on its customers. However, many of those customers already have other business intelligence solutions, Hamerman said. SAP needs to back off that approach and integrate the technology it acquired into its existing software, he added.

"SAP has admitted to some mistakes and has made a positive move to go forward and try to rebuild trust with its customers," Hamerman said. McDermott and Snabe are good choices to address those issues, he added. "It really brings technology back to the forefront and I think it's essential for SAP to do this."

The company faces stiff competition from Oracle and Microsoft in the enterprise, as well as the mid-market, where it is seeing rivals such as NetSuite and Workday Inc., he added. SAP needs to shore up its software-as-a-service strategy. Its plans to bring its Business By Design back to the market this year should make it a player moving forward.

"I think they've made some good progress on Business By Design," Hamerman said. It's a product that I think will strengthen their competitive position against Microsoft in the mid market."

About the Author

Jeffrey Schwartz is executive editor of Redmond Channel Partner and an editor-at-large at Redmond magazine, affiliate publications of Government Computer News.

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