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SAP's new CEOs need to show vision, clear product roadmap to customers, observers say

Bill McDermott and Jim Hagemann Snabe have their work cut out for them in delivering a clear vision for the future of SAP to a jilted customer base, according to industry observers.

In order to restore trust in its customer base, SAP's new CEOs need to deliver a coherent SAP product roadmap and vision, with a goal of lowering the total cost of ownership of running its applications, several industry observers and analysts suggest.

Customers want to understand how SAP's vision fits into their businesses and how it can help them optimize their existing SAP application landscapes. SAP needs to send clear messages on topics like pricing, company policies, delivery options and product priorities. It needs to focus on delivering a better end-user experience. And it may even need to find ways to allow customers to stay on older versions and innovate via on-demand extensions, according to interviews with analysts.

For more on new SAP CEOs Bill McDermott and Jim Hagemann Snabe
Read an interview with Bill McDermott

Read what Jim Hagemann Snabe had to say about his priorities for SAP customers

"SAP has got to go back and articulate that they're committed long-term to the things that are important to customers -- the reasons they bought SAP in the first place -- the integrated suites, the deep industry verticals," said Gartner vice president and research fellow Jim Shepherd. "They want SAP focused on lower cost of ownership and more flexibility in terms of purchasing and deployment."

"SAP needs to come up with a believable yet audacious vision for the future," said Gartner research director Thomas Otter. "I watch SAP every day, and I find it hard to explain what SAP wants to do. If I don't understand that, how should someone who's a busy CIO understand and believe in SAP's vision?"

On Sunday, the Supervisory Board announced that SAP CEO Leo Apotheker had resigned after the board elected not to renew his contract, which was set to expire in May.

Several factors contributed to this non-renewal. Internally, an employee survey conducted in December garnered negative feedback and revealed low employee morale, according to Otter. In turn, SAP's financial performance over the last year hasn't been stellar.

Plattner: SAP lost its customers' trust

But a sigfnificant reason was the recognition that SAP had lost its customers' trust, according to Hasso Plattner, the company's co-founder. Such customer discontent came to a head with the introduction of SAP Enterprise Support, in which SAP tried to move its customers to a richer but far more costly support and maintenance offering, according to Ray Wang, partner at Altimeter Group. And Apotheker was one of the key drivers of the decision to increase maintenance and support fees from 17% to 22%.

"We made a mistake, and we have to change course here," Plattner said, referencing the Enterprise Support debacle, which he said wasn't solely Apotheker's fault. "SAP did this and now we have to regain the trust from the customers. Unfortunately, the head of the company takes a lot of the blame."

Along with naming Bill McDermott and Jim Hagemann Snabe as co-CEOs, the changes put Plattner back into more of a leadership role. Moreover, with the appointment of CTO Vishal Sikka to the executive board, customers can expect Plattner to have a stronger influence over product development because, according to Otter, Sikka has a very close relationship with Plattner.

In a call with reporters, Plattner did make quick references to some of the challenges the customer base is facing -- acknowledging the huge hurdle for R/3 customers to upgrade to the ECC 6.0 architecture -- and told them "please trust that we have not forgotten you."

Plattner himself offered little explanation for Apotheker's departure, even explicitly saying that he was doing so "on purpose" and that he wanted to make only "forward looking statements."

But a coherent, larger vision wasn't relayed. He talked in spurts about the company's on-demand suite Business ByDesign, about in-memory computing and a database he promised to deliver by Sapphire, and about development of SAP on-demand applications. Hagemann Snabe and McDermott will be holding another call next week with more details.

Plattner took head on the complaint that SAP has paid too much attention to margin at the expense of customers. Margin, growth and innovation would be the focus going forward, he said.

"We are a public company, and profit is everything," he said. "But in order to be profitable, it needs to be a happy company. I will do everything possible to make SAP a happy company again."

But to make customers happy, SAP should focus on picking them up where they are -- such as allowing customers to remain on older releases and innovate via cloud extensions, Strategy Partners' Helmuth Gümbel said.

"I need to tweak the future in such a way it can be leveraged from a bloody old installation," he said.

Plattner thinks SAP's best days are ahead of it.

"I just remind you that the best years of Oracle were when Larry Ellison and Ray Lane worked together, the best years of Microsoft were when Bill Gates and Steve Ballmer were together," Plattner said. "I feel extremely confident that this is the right solution for a situation where we have to be extremely strong in the market while we do as much as possible on the innovation side."

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