Global CIO: The CEO Of The Year Is SAP’s Bill McDermott

With co-CEO Jim Snabe, McDermott’s set a vibrant new strategy, restored growth and profitability, and exorcised some wicked demons and ghosts.

By Bob Evans
InformationWeek
July 30, 2010 11:35 AM

If you’ve ever sat on an airplane next to a nervous flyer—fidgeting, sweating, casting about, praying to be anywhere in the world except where he is at that moment—then you’ll know what it was like watching SAP and many of its employees for much of 2009 and January 2010.

Through no fault of their own, many of SAP’s global workers were trapped during that time within their own confined and restrictive space, filled with uncertain and often unpleasant thoughts about what could happen, and worst of all feeling completely powerless to assert any control over where they were headed and what might happen along the way.

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I won’t rehash the whole unfortunate story but suffice to say that by the company’s very own reckoning and admission, SAP had lost the trust of its customers, had tanked the morale of its employees, had stumbled in product development, and was getting hammered on revenue, earnings, market share, and reputation.

But in an extraordinary turnaround, SAP here today in mid-2010 is growing, innovating, expanding, acquiring, and recapturing the customer-side magic that made it one of the world’s most powerful and admired software companies for about three decades.

And just as it’s no doubt overly simplistic to try to lay all the blame for its dreadful 2009 on ousted CEO Leo Apotheker, so too would it be a bit flimsy to try to toss all of the credit onto the shoulders of co-CEOs Bill McDermott and Jim Snabe. Nevertheless, it’s safe to say that without their inspired and relentless leadership, SAP would very likely still be trying to dig itself out of the very deep and cold hole into which it crawled and hunkered down in 2009.

To Snabe, I take my hat off for his confident leadership of the whole product side of SAP, typified by his giving greatly increased responsibility to SAP’s outstanding CTO, Vishal Sikka, without worrying that Sikka might overshadow him. And Snabe has no doubt made many other big contributions to SAP’s dramatic reversal not only among the company’s vast developer ranks but also with customers and in Executive Board meetings as well.

But from my perspective, the guy who has set the tone—customer-centric in everything he does, forward-looking in his strategy, positive in his portrayal of the company’s prospects, and willing to totally refashion the entire company in the image and likeness of customer requirements—co-CEO Bill McDermott gets my vote as CEO of the year.

Yes, I know, 2010’s still got five months to go, and yes, I realize that a charismatic personality’s nice but hardly enough. So let’s look at the numbers and some other results that Snabe and McDermott, who leads SAP’s global field operations, have put together per this week’s earnings results:

McDermott’s Sudden Impact

·  Revenue up 16%, with strength in all geographies and across all product lines

  • Earnings up nicely for the second quarter in a row
  • Solid growth in new enterprise licenses
  • Continued strong preference for SAP’s highest-end version of support and maintenance.

And let’s toss in a few strategic achievements as well:

  • The momentum-building Sybase acquisition, showing SAP’s a player again and not just spectator hoping not to get rained on
  • The formation of a cohesive companywide strategy that connects SAP’s current strength with its future potential: on-premise, on-demand, and on-device
  • The company’s intense commitments to being the industry’s technology leader in delivering what it calls real real-time business with it’s in-memory technology advances.
  • And Snabe and McDermott’s leadership in SAP’s premise that mobility doesn’t represent the future for the enterprise, but actually the present—right here, right now—and that SAP is the best partner to get you there.

On top of that, consider a couple of other factors that McDermott highlighted in a phone interview with Global CIO Tuesday afternoon, including the addition of 5,500 new customers in the quarter: “In 2005, we had a total of 30,000 customers, and we laid out a very ambitious goal of increasing that to 100,000 by 2010—it was one of those ‘send a man to the moon and bring him back safely’ kinds of goals,” McDermott said.

“We’ve always loved the Fortune 1000 and we still love them today and we always will love them, but we realized there was one thing problematic with that Fortune 1000: there are only 1,000 of them,” he said with a chuckle. “So we said if we’re gonna go and be a real market leader in the world, we have to expand—we also have to reach medium-sized businesses and small businesses.”

And McDermott said SAP’s done just that: with 5,500 new customers in the quarter, SAP now has a total of 102,500 companies running its products around the world. “And we’re seeing this in big theaters like North America as well as the BRIC and tier-2 emerging markets,” McDermott said.

So 5,500 new customers in one quarter—about 91 days—translates to about 60 new customers per day, including Saturdays and Sundays, in April, May and June. There were times in 2009 during SAP’s year of discontent when you had to wonder if SAP could land 60 new customers in a single quarter, let alone rake in 60 new ones every single day for 91 straight days.

That’s some very powerful momentum, and it shows confidence in the company’s ability to deliver not just within the big global companies where it’s always been so strong, but also within mid-sized companies and even emerging enterprises.

“In fact,” McDermott said, “74% of our revenues now come from small and medium-sized customers.”

Most telling, SAP’s old bogeyman of annual maintenance fees, or what the company calls “software support and software-related services,” were up 14% in the first half (McDermott and Snabe took over on Feb. 7 of this year), right in step with the 14% first-half revenue increase from sales of software licenses. In 2009, that was an explosive issue that SAP bungled repeatedly, and was surely a big factor in causing many companies last year to pull back on their SAP spending and question whether SAP still had what it takes to run high-velocity global businesses here in 2010.

In addition, the company’s long-awaited on-demand product, Business ByDesign, is now on track and ready for rollout within the next week in six different countries. You might say that it’s a few years late, and that’s true. But it’s also true that McDermott (and Snabe) have managed, in just five months, to turn Business ByDesign from what had been under Apotheker SAP’s own private-label version of Banquo’s ghost into a much-anticipated and indispensable element in SAP’s newly articulated strategy of on-premise, on-demand, and on-device. And it will play strongly into the SME momentum SAP’s already building.

Here’s another and equally daunting ghost McDermott has flushed from the psychic halls of SAP: Oracle. Or, Oracle and Larry Ellison. Or, Oracle and Ellison’s not-infrequent and very public taunting of SAP. Just a couple of quarters ago, Ellison during an Oracle earnings call was razzing SAP by pretending to praise it for having lowered the rate of its revenue decline—and Ellison then went on to articulate in detail how he and Oracle would displace SAP as the world leader in enterprise applications.

Here’s an example of the sharply pointed commentary that SAP’s earlier floundering inspired at Oracle:

Oracle Who?

“Every quarter we grab huge chunks of market share from SAP,” Ellison said in a March 25 press release announcing quarterly earnings. “SAP’s most recent quarter was the best quarter of their year, only down 15%, while Oracle’s applications sales were up 21%. But SAP is well ahead of us in the number of CEOs for this year, announcing their third and fourth, while we had only one.”

It’s also well worth noting that the tone of the commentary in Oracle’s most-recent earnings press release, dated June 24, was quite different: with SAP having just reported solid quarterly results under the new leadership of McDermott and Snabe, Ellison didn’t so much as mention SAP.

But McDermott’s inexorable focus on customers and opportunities has pushed the Oracle thing so far out of SAP’s consciousness—or at least out of his own publicly facing consciousness—that he just about never mentions Oracle’s name. I think he might have dropped the O-word once or twice during his first public comments as co-CEO early this year, but in the several times since then that I’ve seen him speak or have spoken directly with McDermott, the O-word never comes up.

“From when I became an entrepreneur at age 17, running my own business in high school and college, I knew that it was the customers and the customers alone that would determine whether I continue to have a business,” McDermott said in our phone conversation earlier this week.

“Those views haven’t changed in my 25 years in the IT industry, and today customer innovation is the Number 1 factor for us in determining real customer value: can we help them run their business differently and better, can we help them access new markets, can we help them motivate their people, can we help them build and extend business networks, and can we help them create real opportunities.”

Those attributes, he said, are SAP’s keys to success, as opposed to the tactics of that competitor he refused to identify but that he described as one that focuses on the short-term play of consolidating through acquisition, laying thousands of people off, raising shareholder value, but not offering any real long-term innovation.

The exorcising of the Oracle ghost and others seems to have made an indelible impression on SAP’s workers, a point McDermott underscored in describing a recent gathering of 23,000 SAP employees and family members in Germany:

“Let me tell you about the secret sauce at this company these days: I was with my family in Germany over the weekend at a big company party and it was raining and cold but there were 23,500 people there, including 8,000 kids playing on monkey bars and running around,” McDermott said. “It was great—being one big family, and getting energized, and having fun, and the party went on until 1:00 a.m.—it was like Woodstock!

“I’ll tell you, the whole company’s on some real adrenaline now—and it’s amazing to watch.”

Turnaround artist, confident co-CEO, customer-centric leader—all are roles McDermott will need to continue to employ aggressively and relentlessly. But one role that McDermott can drop is the exorcist-in-chief gig, because here in mid-2010 it appears that all of SAP’s demons and ghosts are long gone.

SAP Labs Application-Server Development Architect, River Team

PURPOSE AND OBJECTIVES

Location: Palo Alto, California USA

View Job Descriptionhttp://bit.ly/dcseAU

For personal consideration contact: kevin.daprile@sap.com

SAP’s Platform and Technology team within the office of the CTO (oCTO) is currently developing a next-generation, OD platform using the Cloud infrastructure with the objective of enabling SAP to deliver world-class OD applications. We are seeking highly-motivated, action-oriented leaders and offer the unique opportunity to shape an evolutionary application & platform that is a critical element of SAP’s go-forward strategy in the exciting OD segment.  As an architect of application & platform you will be responsible for working with application development, platform development and solution management team to drive mission objectives through the adaption of strategic technologies (Device and Cloud Computing, Advanced Real-time Databases/Data Warehouses, Predictive Analytics, Business Analytical Applications) and then delivering strategic architectural frameworks, innovative and reusable software

components to be leveraged across SAP onDemand applications, services and Partner EcoSystem.

This includes interfacing with the research Office of the CTO, Product Strategy and Development,

Performance and Insight Optimization office, and the Extended Eco-system.  The ideal candidate would be a  strategist/technologist with indepth Application Server knowledge to cater business applications and  platform needs.  Should possess strong collaborative & leadership skills, tech savvy  with latest technologies,  experienced in product design and adaptation, and proven record of success in driving visionary programs out of labs. Able to commend  a matrix organization  and  work with virtual teams across globe  towards the design, development and roll-out of generic platform.

EDUCATION AND QUALIFICATIONS/SKILLS AND COMPETENCIES

  • Bachelors or advanced degree in computer science or related technical disciplines; Masters  is a plus
    • Agile product development methodologies (SCRUM) is required
    • Working in a fast-paced startup environment is required
    • Working in a matrix environment with solution management, architects and “virtual” team members
    • Required Technical Experience
      • Experience with internals of one or more mainstream application servers such as WebLogic, WebSphere, and Tomcat
      • Previous experience working on a large scale online transactional processing enterprise application
      • Solid hands on understanding of multi-threaded development
      • Understanding of O/R mapping concepts and tools (Hibernate, JDO) and other open source technologies
      • Strong knowledge of commercial RDBMS
      • Strong object-oriented analysis and design skills together with excellent trouble shooting skills
      • Knowledge of XML, XPATH, XSLT, Xquery
      • Knowledge of one or more of these technologies: GWT, Tomcat, Spring, JMS, Struts, J2EEExperience with cloud based platform such as  Amazon is a must
      • Knowledge of REST a MUST.
      • Experience in programming languages such as Java, Ruby
      • Experience in building new programming model, knowledge of DSL would be handy
      • Knowledge of UI technology such as GWT, Flex is desirable
      • Understanding of OLAP, ROLAP will be beneficial
      • Excellent oral and written communication and presentation skills

WORK EXPERIENCE

  • 10+ years building large scale enterprise and distributed applications
  • Proven track record in lead and architect  position for  3+ years
  • Experienced with SAP technologies & tools
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