SAP CEO Lo Apothekers Contract Will Not Be Extended Based on Mutual Agreement

SAP AG has announced that the SAP Supervisory Board has reached a mutual agreement with CEO Lo Apotheker not to extend his contract as a member of the SAP Executive Board. Lo Apotheker has resigned as CEO and member of the SAP Executive Board effective immediately.

The SAP Executive Board, in agreement with the SAP Supervisory Board, has appointed two Co-CEOs: Bill McDermott, head of field organization and Jim Hagemann Snabe, head of product development, both already members of the SAP Executive Board.

In addition, Vishal Sikka, Chief Technology Officer, has been appointed to the SAP Executive Board. At the request of the SAP Supervisory Board, Hasso Plattner, Co-Founder of SAP and Chairman of the SAP Supervisory Board, will continue to play a strong role in advising the new leaders on technology and product development.

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 SAPs strategy and focus on profitable growth, and will deliver its innovations in 2010 to expand SAPs leadership of the business software market, said Hasso Plattner.

The SAP Supervisory Board thanks Lo Apotheker for his enormous contribution to the success of SAP, which he joined more than 20 years ago, and wishes him all the best for the future.

Apotheker's departure, although sudden, is a natural consequence of several factors during a trying economic period, says US-based Gartner analyst Yvonne Genovese. The most important of these are the controversial enterprise maintenance plan, declining customer and employee satisfaction, and a lack of a clear product path. Apotheker led the drive to consolidate all customers onto a single, more expensive enterprise maintenance programme, but this angered many customers. After a year-long negotiation process with SAP user groups, the software maker was forced to reinstate a standard support option in January 2010.

Plattner said in a conference call to partners and customers that SAP had to win back trust and had made mistakes in the past, including the way it acted over maintenance fees. "We did not look at the issue for the angle of a user that was based on fairly old but stable SAP technology," he said. The change in leadership is aimed at winning back the support and trust of customers as well as employees, says Germany-based Gartner research director Thomas Otter. An employee survey in September 2009 revealed a lack of confidence in SAP leadership. This is the most likely reason the advisory board, which has strong employee representation, has taken this decisive step sooner rather than later, says Otter.

Apotheker's emphasis on sales rather than development is another important factor, as SAP has consequently lacked a strong technology vision. "SAP does not have a clear strategy that both communicates how SAP will adjust to current industry trends, such as cloud, and how it will enable short-term important enhancements, like analytics," says Genovese. SAP has lacked a technology visionary since the departure of former technologies group president Shai Agassi in April 2007, she says.

In the new structure, Plattner, Sikka and Snabe will play that role and help restore the balance between sales and technology innovation that existed around five years ago, says Ray Wang, partner at consultancy Altimeter Group.They will need strong product vision to right SAP and point it in a forward direction, and the return to a joint leadership structure will also help restore that balance, he says. While Otter believes there was little alternative but to return to a joint leadership structure, Wang says this is the right way to go for an organisation as big as SAP. "There is too much going on that needs attention for one person," says Wang. US-based Gartner analyst Jim Shepherd says the move may also be in recognition of the fact that neither McDermott nor Snabe have experience of running an organisation of the size of SAP.

"There may be a feeling that their skills and personalities will complement each other," he says. Equally as important, says Shepherd, is that both co-CEOs are popular with employees and represent a new generation of leadership without bringing in an outsider. The new structure will help SAP push out the long-delayed Business By Design product set for the mid market and bolster product innovation back to the levels needed to remain competitive and grow, says Wang. Shepherd says, at the very least, he expects to see some announcements about SAP's product strategy and delivery options, which will be good for customers, although this will take some time. "SAP has not forgotten you and many successful systems cannot be changed overnight, but we will do everything possible to speed up upgrades," Plattner told customers in the conference call.

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