Bill McDermott was in New York City on Tuesday, discussing another big quarter for SAP. McDermott, who as CEO of SAP Americas and Asia Pacific led the once fledgling U.S. division to 10 consecutive quarters of growth in market share, described turning in a quarter like this in this economy as "pretty stunning."
McDermott recently moved into the position of president and CEO of global field operations and executive board member. He oversees SAP operations worldwide. In a wide-ranging interview with SearchSAP.com, he talked about why Enterprise Support is a good deal, why Oracle isn't keeping him awake at night, and how Oracle could help solve an SAP skills shortage.
How will you keep growing your customer base in the United States?
If you look at our platform, many of our customers might have ERP or they might have our financials or our HR -- in some cases, even supply chain.
But they may not have customer relationship management. They may not have Business Objects. They may not have many of the third-party products that are now supported by the SAP platform -- for example, Adobe interactive forms or Microsoft Duet. They may not have taken advantage of our RIM announcement …there's actually a billion mobile workers in the workforce between now and 2010 who would love to have CRM enabled on their RIM. So there are many ways that we can grow with our existing accounts.
The other piece that we're seeing, in the United States as an example, 40% of our orders this quarter came from net new names, meaning people that used to run outdated legacy systems or competitive systems, Oracle or companies Oracle acquired. They're basically saying I'm switching to SAP. So is it a new customer? Is it an existing customer upgrading or buying more? Or is it an out-and-out competitive replacement? [These are] all areas where we're growing very well.
Speaking of Oracle, how does its strategy differ from yours? And what do you think of Fusion?
Oracle is a database company. [Their strategy is] growth through acquisition. Oracle is hunting for its next acquisition to cover up the fact that it's not growing. That house of cards sooner or later will come tumbling down. There's a fantasy in the marketing department's mind they call Fusion. [They're trying to build] an integrated …system like SAP. It took us 3½ decades.
Explain to customers why maintenance fees were increased from 17% to 22% of net licensing fees.
First, Enterprise Support is not a maintenance fee increase. It's actually an entirely new service offering that encompasses SAP, third-party software solutions and even the maintenance of the legacy interfaces that go into a platform strategy that customers have embarked upon. Enterprise Support encompasses a broad landscape, which is a more complex landscape than ever before, especially with service-oriented architecture and the idea of innovation on the fly.
The industry benchmark is already at 22%, and they do not offer the completeness of service that we do in Enterprise Support. The well-informed customer sees the value in Enterprise Support and realizes that we're providing that value at the lowest price available in the market today, and therefore it's a winner. We are educating our customers. As they have become aware of what the offering is, we have not had anything less than positive response to the service offering itself, even if people wish it was at a lower price.
We are running a more efficient business on the margin side, and certainly we're growing faster. And incidentally, that had nothing to do with the advent of Enterprise Support at this time because -- well -- we just made that decision for our existing customer base. For more than a year, enterprise support has been the support option of choice for non-SAP customers -- so new customers.
What are the plans for Business ByDesign?
I think the most important thing to remember about Business ByDesign is this is a whole new category of software. This is not a product like any other product in the world. You're talking about configuring a solution, downloading the solution off the Internet, but also not just doing one thing, like Salesforce.com does CRM. Other companies might do just HR; we're talking about the platform for small and midsized companies, downloadable off the Internet on a ready-to-run basis. You change the game. We've basically continued to work with our customers, taken their feedback on their functionality needs, and decided to delay the launch of the product until we have it just right. And when we do, we'll take it to market.
When I say get right, I mean the functionality, and the features that our customers really want. We're testing it with customers now, and they're running it, and they're telling us what they would like to see. Think of them as beta. So when we launch and have a generally available product, it has all the features and functions, it's scalable and it can perform beautifully in a global world.
I would rather be a little bit late and right than a little bit early and wrong. And that's why we want to get this product just right, because we know we have a killer application here.
Should customers be concerned about the TomorrowNow lawsuit?
Customers shouldn't be nervous or in the least bit concerned, because it will not impact them in the least. TomorrowNow is a third-party service alternative. We decided to essentially divest of that business and get out of it, and focus on our core business. The media noise caused by Oracle's filing is something that we'll respond to in the courts and defend our good name vigorously.
Do you think that there is a shortage of SAP skilled workers, and how will SAP address that?
There is a need to continuously increase the staffing for SAP, due to the tremendous demand for SAP's platform and services. Over these next few years, we'll add 30,000 to 50,000 trained SAP consultants.
Some of that will be SAP. But we'll be the small amount. Partners will continuously invest in these students from university. Also, hiring from the industry where a lot of these smaller software companies have failed, or companies like Oracle where the demand continues to go down, that supply will be regenerated toward SAP. It's the partner ecosystem. The partner ecosystem has their own Oracle practice and their own SAP practice, and they have people that serve both kinds of customers. To the extent that SAP's growing faster than Oracle, they will flex the Oracle people and cross-train them on SAP applications.
And then if you look at what's going on in India and China, integrators like Satyam in India, or Infosys, they're hiring literally thousands and thousands of people to focus on their SAP practice. So on a global basis, the supply will be filled, because the demand is there.
It's what I would call a high-class problem.
What do you see as the role of the United States in SAP AG?
A third of the revenues of SAP AG are in the United States. It is a bellwether market for us. And I think the role is to continue to serve as an innovation hub. Many of the innovations have come from the U.S. -- some of the best business practices -- and to the extent we are combating our competition in the U.S., because that's where they are domiciled also, it gives us a tremendous learning, [because] what will work in the U.S. will likely work in other parts of the world.
How does SAP's culture separate you from competitors?
I think the culture is so different from the competition and, in the end, I think cultures make or break companies. I always tell people don't worry about who gets the credit. It doesn't matter, as long as we win the game. And as long as that customer's a winner, we're winners.
Certain competition … has a command-and-control style. They manage everything centrally, very much a U.S.-centric view of the world. I don't think that works as well in a diverse, fast-moving global economy where a lot of the growth and a lot of the innovation is going to come from faraway places, like India, like China. A lot of the innovation I see coming is from the East. I also think that it's not only going to be Brazil, Russia, India and China, it's going to be the Middle East, it's going to be Africa. It's going to be Argentina, Chile, Colombia; it's going to be Turkey. It's going to be places that are ripe to really grow and transform their economies and their businesses.
What we try to do is have a very diverse management team. So their cultural priorities look a lot like the markets in which we compete. And I think that makes a difference, instead of a command-and-control style coming from one state, in one country.
You think SAP's encouragement of community service makes it a better business. Why?
I personally think the true measure of a person is not what they take from this world, but what they give.… And people say, is it just giving, just doing good? No, it's not. It's good for business too. Because …when we do these projects, we'll take a young person, very often someone that we see has potential, and we'll say, "You're running the project." What you see quickly is who the future leaders of your company are going to be. We're developing our leaders.
We're creating a culture that is trying to do the right thing.