In the night before its earnings call for Q1 2020, SAP surprised (probably) all of us with another change in its executive team, ending the dual CEO structure with Christian Klein and Jennifer Morgan.
Before we jump into analysis – let's dissect the call in our customary style (the press release can be found here):
WALLDORF — SAP SE (NYSE: SAP) today announced that Christian Klein (39), Co-Chief Executive Officer and member of the Executive Board, will continue as sole Chief Executive Officer. Jennifer Morgan (48), Co-Chief Executive Officer and member of the Executive Board mutually agreed with the Supervisory Board of SAP SE that she will depart the company, effective April 30, 2020.MyPOV – Short and sweet. All said in one paragraph. That was (unfortunately) a very short tenure of the first woman leading a DAX company, little more than half a year. Last time SAP got rid of the co-CEO structure, it was Bill McDermott taking over… but it was 9 months heads up and Jim Hagemann Snabe went to the SAP board then (see the great piece of former colleague Chris Kanaracus here).
More than ever, the current environment requires companies to take swift, determined action which is best supported by a very clear leadership structure. Therefore, the decision to transfer from Co-CEO to sole CEO model was taken earlier than planned to ensure strong, unambiguous steering in times of an unprecedented crisis.MyPOV – This is little bit of an odd justification – as SAP has successfully managed though tough economic times with dual CEOs (the dot com bust with Plattner / Kagermann and the 2008 downturn with Kagermann / Apoteker – handing things over again to dual CEOs in 2010 with McDermott / Hagemann Snabe). The co-CEO model certainly takes time to coordinate, but typically leads to better decision management.
"I am grateful to Jennifer for her leadership of SAP, including all she has done for the company, our people, and our customers," said Professor Hasso Plattner, chairman of the Supervisory Board of SAP SE. "This transition comes at a time of great uncertainty in the world, but I have full faith in Christian's vision and capabilities in leading SAP forward toward continued profitable growth, innovation, and customer success."MyPOV – Good quote from Plattner, note he thanks Morgan first for company, then people, then customers. No mention of product or innovation. Innovation and customer success come out when he (as all board chairman do) praises the new sole CEO. Let's follow that aspect… as it will matter in the overall MyPOV later.
"I'd like to thank Jennifer for her partnership over many years," said Christian Klein, CEO of SAP SE and member of the Executive Board. "Throughout SAP's transformation, Jennifer has always been laser-focused on customers, partners, shareholders and employees. It's thanks to her that we have established a strong position in experience management solutions. I know she will always be a champion of SAP."MyPOV – Good quote from Klein. He adds partners and shareholders to the employee and customer mix. Both Klein and Morgan became SAP board members in close proximity, Morgan in 2017 and Klein on January 1st, 2018. While that maybe 'many years' for a few companies, it certainly is not for SAP, where that usually is a term you pack out for a decade plus of working together. Interesting Klein also mentioned experience management, which is the Qualtrics acquisition. But its this area where SAP has done little progress, as we are coming to the one-year anniversary of Sapphire where Qualtrics and the merge of O and X data was all the headlines.
"It has been a great privilege to drive SAP's growth and innovation in so many areas and most recently as Co-CEO," said Jennifer Morgan. "With unprecedented change within the world, it has become clear that now is the right time for the company to transition to a single CEO leading the business. I would like to thank Hasso Plattner for the opportunity to co-lead this great company, and I wish Christian, the Executive Board, and SAP's talented team much success as they drive the company forward."MyPOV – Good quote from Morgan, fair and positive. She adds innovation to SAP growth… innovation at software companies means products, but Morgan only had direct product responsibility since taking over the Cloud Business Group (aka the six sisters of Ariba, Concur. Fieldglass, hybris, Qualtrics, SuccessFactors). And there the agenda was set – bring the products to SAP HANA and SAP BTP (the former SAP Cloud Platform). To be fair, under her leadership SuccessFactors championed HXM, the merger of Qualtrics capabilities to measure employee engagement.
Morgan joined SAP in 2004 and was appointed co-chief executive officer, together with Klein, in October 2019. Previously, she served as president of the Cloud Business Group, overseeing Qualtrics, SAP SuccessFactors, SAP Ariba, SAP Fieldglass, SAP Customer Experience and SAP Concur. She was named an Executive Board member in 2017.MyPOV – A remarkable career, that previously started at Andersen Consulting, she spent four years at Siebel, before joining SAP in 2004 in public sector (and a tidbid - Adair Fox-Martin joined in ... public sector as well). At 48 Morgan has a lot of CEO and other executive options ahead of her, she can basically choose. Better chances for a long tenure than say in 5-6 years two board contracts down the road. Might have been a factor.]
|The SAP co-CEOs Christian Klein an Jennifer Morgan in Walldorf in January 2020|
Overall MyPOVAt the end of the day SAP is a software company and software companies thrive with successful products. The irony is that SAP over time has thinned its product development leadership over a decade now. Agassi left in 2007, Sikka left in 2014, Leukert and Goerke left in 2019. The longest fix point on product is Plattner. Product leadership is now in the hands of Thomas Saueressig, the former CIO. Saueressig reports to Klein, when Klein was CEO and Klein brought him 'over' to lead products. And Saueressig is doing a good job at getting the priorities of S/4HANA right. Certainly, a better one than the heads of product over at the six sisters… who all were busy to move their products to the SAP platforms. Nothing to excel and inspire a board to hand over the reins to them.
The immediate question Klein needs to answer what is going to happen with the product development areas that had not yet reported directly or dotted line to Saueressig. That's Qualtrics and whatever SAP calls its CRM ambitions under seasoned CRM product leader Stutz. I would not be surprised if all goes to Saueressig. SAP needs good, better great CRM to be a competitive ERP player. Too much depends on customer processes. SAP was most successful because it built on a single platform. Bringing together the O and X data on the SAP BTP (aka Cloud platform) is a key differentiator. It's also a key test for the agility of the SAP BTP to support standalone third-party deployments that Qualtrics certainly needs to keep supporting.
As a father of three daughters I was excited to see (finally) a woman lead a DAX company. Europe tends to be behind when it comes to diversity at the top. Unfortunately, Morgan's tenure was way too short. I am also a fan of the dual leadership model, as it leads to better decisions. The problem at SAP is, that the decisions are made – S/4HANA is becoming the R/3 successor – with all its ERP automation in a single product (single schema we will see) and on a single platform. Fox-Martin can and will deliver the sales numbers, services is rolling. So, there was no room to play and add for Morgan. I wish her well and I am sure she will show up in a leadership role. Though: Due to SARS-COV-2 - sales and services models need to move digital and right now that is not happening with the large traditional SAP implementations on the old continent. This maybe a formidable challenge ahead, if the pandemic ripple effects last longer.
For Klein and Saueressig it is all about getting the S/4HANA value proposition right. Augment it with the capabilities of the '6 sisters'. Deliver the integration plans. Have it all ready a few years before the now extended support and maintenance timelines expire. Oh – and in the meantime, keep SAP numbers up and keep the R&D team protected. It's hard to build new product, its even harder to build new product with less product developers. Writing this on the day before, actually less than 7 hours before the earnings call (April 20th 2020), for which SAP already had to warn as traditional on-premise revenues were not coming in as planned.
Right when you though things would calm down and become a little dull at SAP, here comes another change. Never a dull moment.
Some recent SAP blogs:
- News Analysis - SAP keeps - re-organizing - Fox-Martin in charge of world-wide sales, Enslin out, replaced by Morgan - read here
- Musings - SAP democratizes Product Development - what does it mean for Customers? read here
- News Analysis - SAP intends to buy Qualtrics - Pairing operational and experience data – And it's 6 sisters - read here
- News Analysis - Adobe, Microsoft and SAP announce the Open Data Initiative to empower a new generation of customer experiences - Good idea, good start... - read here
- Event Report - SAP Ariba Live 2018 - Las Vegas - Sustainability and UX - read here
- Event Takeaways - SAP at MWC 2018 - read here
- Market Move - SAP acquires Callidus - More Sales Effectiveness in the Back Office of the Front Office - read here
- News Analysis - SAP HCM On-Premise Option for SAP S/4HANA - or is this S/4HCM? - read here
- News Analysis - Microsoft and SAP join forces to give customers a trusted path to digital transformation in the cloud - read here
- Event Report - SAP Hybris Live 2017 Barcelona - YaaS morphs and more agility ahead - read here
- News Analyses Roundup - SAP's September Tech Announcements - SAP doubles down on technology - read here
- Event Report - SAP SuccessFactors SuccessConnect - New Leadership - Old Challenges - read here
And some Constellation Research reports on SAP:
- SAP SuccessFactors Leads with HR Core, Payroll and Global Capabilities, by Holger Mueller, January 10 2020 - see here
- Constellation ShortList™ PaaS Suites for Next Gen Apps, By Holger Mueller, February 27th 2019 - see here
- Constellation ShortList™ Global HCM Suites, By Holger Mueller, February 20th 2019 - see here
- Experience Management Drives SAP's Acquisition of Qualtrics, by Nicole France, Holger Mueller, R "Ray" Wang, November 28th 2018 - see here
- SAP Hybris advances its Platform, By Holger Mueller, November 20th 2017, see here
- SAP Cloud Platform: A New Standard for a SaaS Vendor's PaaS, by Holger Mueller, June 13th 2017, see here
- SAP HANA 2 Ushers in the Next Era of Pure In-Memory Applications, by Holger Mueller, December 27th 2016 - see here
- SAP UXaaS Democratizes Usability, Starts Next Wave of User Experience, by Holger Mueller and R 'Ray" Wang, April 7th 2016 - see here
- Musings - IBM's 10th CEO takes the reins - Krishna has his work cut out for him - read here
- Musings - Why Open Source has won and will keep... winning - read here
- Musings - Enterprise Acceleration - and what every HR Leader should know about it - read here
- Musings - SAP democratizes Product Development - what does it mean for Customers? Read here
- Musings - Why splitting Windows is Nadella's first major mistake - read here
- Musings - Time to bring back the software user conference - read here
- Musings - Does Oracle and Accenture make sense - or never ever! - read here
- Musings - Happy 10th Brthday iPhone - afraid the next 10 years will be harder - read here
- Musings - The Privacy Shield is real - what are the CxO repercussions? Read here
- Musings - The Bots are coming to your conversation - what are the implications? - read here
- Musings - We are entering the age of the Über Super Computer - read here
- Musings - Retail is the breeding ground for NextGen Apps - read here
- Musings - Time to re-invent email – for real! Read here
- Musings - The Dilemma with Cloud Infrastructure updates - read here
- Musings - Are we witnessing the Rise of the Enterprise Cloud? Read here
- Musings - What are true Analytics - a Manifesto. Read here
- Musings - Microsoft does not need one CEO - but six - read here
Find more coverage on the Constellation Research website here and checkout my magazine on Flipboard and my YouTube channel here.