Amid Turmoil, Questions Loom for SAP At Sapphire

The event is incoming sole CEO Bill McDermott's 'time to shine,' says one analyst

You could look at SAP's recent flurry of eye-opening news -- high-profile executive departures, reorganizations and most recently, a layoff announcement -- as a negative thing, given they come just weeks before the company's big Sapphire conference in Orlando.

Sapphire is SAP's biggest opportunity to set out its agenda to customers and partners, and recent events could arguably prove distracting to that mission.

But looked at another way, Sapphire presents SAP with an opportunity to clearly explain its new path forward while the changes remain top of mind for customers, partners and industry observers.

Here's a look at some of the key opportunities for SAP at the event.

All eyes on Bill: Sapphire will mark the anointment of Bill McDermott as sole CEO of SAP, as co-CEO Jim Hagemann Snabe steps down and takes a supervisory board seat.

While SAP has used a single CEO structure before, McDermott will be the first American to take that role at a company that has certainly globalized but remains close to its German roots.

McDermott is known for his sales-savvy charisma and swagger, but should that be the approach he takes during appearances at Sapphire? One analyst says no.

"This is Bill McDermott's opportunity to shine," said analyst Ray Wang, founder and chairman of Constellation Research. "He has to come across authentic, empathetic and visionary all at once. He needs to introduce the team that will get them there and help customers bridge the past to the future."

He also needs to put an end to SAP's continual reorganization, according to Wang. "Customers can see that and they don't like it," Wang said.

"More importantly, he needs to help customers understand how SAP can be relevant again to their business and continue to go after line-of-business decision makers," he added. "This is not an easy task to do, but Bill's got the chops. It won't be easy, but it's only fair to give him some time."

Who's on the bench?: SAP put long-time executive Bernd Leukert in charge of product development after the abrupt departure of technology chief Vishal Sikka earlier this month. Sikka had been the champion of Hana, the in-memory computing platform that's at the heart of SAP's development efforts.

Leukert is well-respected, particularly among SAP Business Suite customers, but may not be as well known among the company's other constituencies, such as the Business Objects user base. Sapphire offers SAP a chance to introduce Leukert in a high-profile manner, perhaps alongside co-founder Hasso Plattner, with whom Sikka worked closely.

But SAP must go beyond showcasing Leukert, according to another observer.

"It's clear that Bill is putting his mark on the company and restructure, using Visha's departure as a catalyst for change," said John Appleby, global head of SAP Hana at consulting firm Bluefin Solutions and an SAP Mentor, the title given to its most deeply involved community members. "What we need to see at Sapphire is Bill's strategy, having strong people who can grow into their new roles. Can SAP show its bench is strong enough?"

Wang echoed the thought. "He's got to talk about the new talent that's been hidden in the ranks and how they are being surfaced after the layoffs," he said.

At least one user group head expressed confidence in the personnel changes SAP is making.

Sikka's departure from SAP was "really surprising," said Marco Lenck, chairman of DSAG (German-speaking SAP User Group), which represents customers in Germany, Austria and Switzerland. "We worked closely together with him. I really regret he is leaving SAP."

On the other hand, with Leukert SAP has appointed a "very, very experienced person" to replace Sikka, Lenck said. Leukert not only knows how to develop application software, he understands deeply how many different types of customers use SAP in their businesses, he added.

Overall, the executive board changes are good ones, according to Leukert. "We feel comfortable they'll represent our needs as a user group."

Product watch: "In downsizing personnel, is SAP also likely to sunset some products -- if so, clear indications are needed as soon as possible," said independent enterprise software analyst China Martens, via email.

It will also be interesting to see whether product lines that have stood in the shadow of Hana, such as SAP's mobility assets, will figure more broadly in its road map messages at Sapphire.

It's expected that Leukert's leadership will bring about a bigger focus on new applications that are powered by Hana, versus talk of Hana's performance and position as a platform. While SAP has publicly assured that Hana remains a huge part of its future, Sapphire could reveal how much those plans are about to change.

Different constituencies: "I think in general, the questions customers need answered at Sapphire vary somewhat depending on the size of the company," Martens said.

Global enterprises that engage in "co-innovation" with SAP tend to have relationships with C-level executives at the company, she said. "They will require reassurance about who their corporate champion is -- if that individual is no longer with SAP. They need to know they still do have influence over SAP regarding technology direction, specific (often industry-focused) functionality, and pricing negotiations."

Smaller and midsized companies "urgently require SAP to talk directly to them about strategy, road maps, and pricing," Martens said. "These are the firms that are at most at risk of migrating away."

Don't forget the core: SAP has been focusing the bulk of its marketing efforts around cloud-based software of late, both concerning applications and how Hana will be moved into the technical picture.

Sapphire will undoubtedly place plenty of emphasis on the latest and greatest.

But while SAP customers are starting to use more cloud products, the vendor's "bread-and-butter" remains its on-premises ERP business, which provides "the backbone" of many enterprises, Lenck said. It's important for SAP to make sure its cloud products can be combined with on-premises software in an effective manner, he added.

There's indeed a division among SAP customers over moving to the cloud, Martens said. Sapphire could be a time for SAP to tell them about hybrid deployment models, cloud migration programs and pricing deals.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

This story, "Amid Turmoil, Questions Loom for SAP At Sapphire" was originally published by IDG News Service Boston Bureau.

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