SAP parts company with CEO

Leo Apotheker stood down yesterday as CEO of German ERP giant SAP. The shock decision is effective immediately.

The board appointed two co-CEOs: Bill McDermott, head of the field organisation and Jim Hagemann Snabe, head of product development. Meanwhile, CTO Vishal Sikka has been appointed to the SAP Executive Board, of which McDermott and Hagemann Snabe were already members.

Co-Founder and Chairman Hasso Plattner will have a strong advisory role in technology and product development, the company said.

"The new setup of the SAP Executive Board will allow SAP to better align product innovation with customer needs. The new leadership team will continue to drive forward SAP's strategy and focus on profitable growth, and will deliver its innovations in 2010 to expand SAP's leadership of the business software market," said Hasso Plattner in the company statement.

Trouble between Apotheker and his board members was flagged up last month following the presentation of SAP's results. Despite delivering an upbeat performance on the future of SAP after a difficult 2009, questions were raised because the board had not renewed Apotheker’s contract, which was due to run until the end of 2010.

Apotheker took over as CEO as SAP was becoming embroiled in a major confrontation with its user community over efforts to drive up the cost of its enterprise support.

The issue was resolved last month when the company did a U-turn and gave its customers a choice of support packages.

The company had also suffered from mounting frustration among its customers at the slow progress of innovation and delays to its Software as a Service Business ByDesign product.

SAP first developed Business ByDesign with a single-tenant architecture, wherein each customer has a dedicated instance of the application. The company had struggled to fundamentally re-architect the product to multitenant design, where users share a single application instance. This is essential if Business ByDesign is to be profitable and has been achieved, though it will be 2011 before Business ByDesign emerges as a major revenue stream for SAP.

Ray Wang, analyst at Altimeter Group said, that Apotheker, though a seasoned executive with over 20 years with SAP, “was in the wrong place at the wrong time”.

“Unfortunately, he entered a down market while in charge of a sinking ship. Low morale among the Walldorf (SAP HQ) engineering team, the issue with Enterprise Support and maintenance, and uncontrollable poor quarterly performance proved to be factors beyond his control.

“Customers over the past 2 to 3 years began to wonder how to tap SAP’s innovation. A clear need emerged for having more technologists at the helm,” said Wang.

SAP’s ability to innovate was a central plank of the company message after last month’s results and the new leadership team is designed to reinforce that impression.

Copyright © 2010 IDG Communications, Inc.

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