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SAP co-CEO says users, innovation are top priorities; downplays Oracle trial

SAP co-CEO Jim Hagemann Snabe talked about what his company is doing differently to meet customers’ needs and the upcoming trial with Oracle.

After SAP’s third quarter earnings were announced, SAP co-CEO Jim Hagemann Snabe spoke to about what it’s doing to better meet customer needs, the speed at which it’s delivering promised products , and the high-profile lawsuit with Oracle over SAP’s former subsidiary TomorrowNow. You’ve said that SAP needed to be closer to its customers, specifically from a development point of view. Do you think you’ve remedied that problem, and how?

Hagemann Snabe: We’re a very different company today. We have taken big steps to make sure that we first of all install agile development methodologies, where smaller teams of 10 are more empowered and working in iterative ways, rather than in sequential ways.

These teams are asked to have at least five customers involved in the actual development process. That means that we move the customer up very early in the innovation cycle. Traditionally, you had them at the end of the cycle to verify that they’ve built something correctly. Now we ask them what they need to run their business better. They are part of the specification, the design and the review that we do every time we have these iterations. We have that being done now, I would say, in 70% of our development projects.

In addition, we have had some very rapid development projects. One example is HANA [an in-memory appliance], which was conceptualized in March, talked about at Sapphire in May, and will now ship at the end of this quarter. This could only be done through early, strong and close cooperation with customers. How much is the current lawsuit with Oracle a distraction for SAP?  How can you assure your customers that all this turmoil won’t affect them?

Hagemann Snabe: I think the key thing is that we’ve acted in a very responsible way. We run a business where responsibility is very high on the agenda.

As you know, we stopped [former subsidiary TomorrowNow] long ago. We’ve taken responsibility, and now it’s up to the courts to decide the size [of the damages]. I would say we have very little distraction from this. I don’t like the media coverage of this, and we are focused on our customers and our innovations. You’ve put a lot of emphasis on getting products to market faster, but we’ve already seen delays with products like Innovations 2010. Do you think you’re living up to your promises? 

Hagemann Snabe: As I said, HANA is one good example where the speed of innovation has really come true. What is happening with the industry, from a strategic point of view, is that some companies are trying to consolidate the market. They’re trying to integrate end-to-end proprietary stacks, from software applications to the database and the hardware. We feel that’s a fundamental strategic wrong direction.

We believe what we need to do is to innovate rather than consolidate. We need to do that by focusing on what we’re good at, which is business software and work with partners like Cisco and Intel, which are very good at what they do. Focusing on companies that innovate is a better combination for customers.  First of all, they get more innovation faster. Secondly, they get choice. And they don’t feel locked in. 

That’s why it’s so important that we accelerate innovation at SAP. We’ve had cycles in the past of two years, from the start of a product until we bring it to market. With HANA, it was from March to the end of November. And with Business ByDesign, the release cycle was six months. With mobile, the release cycle is closer to six weeks. That’s the new SAP. So, you think you have been able to deliver on this promise for the most part, with a few exceptions?

Hagemann Snabe: Let’s talk a little bit about the 2010 enhancements for the business suite. There we delayed the shipment, as you know. A consequence of wanting to innovate faster is a higher commitment to quality as well.

We decided to put the bar on quality much higher this year. So the business suite, in fact, when it was going to be released, [it] was of a better quality than ever before. And yet I decided to [have] the team to do yet another iteration to make it perfect.

You see other companies in other industries. What happens is that the quality doesn’t work. You have to recall many, many cars, or whatever it is, and [in the end] you are really slow. So it looks fast, but you are really slow. I want many productive customers, not just a fast release to the market. There’s been some negative press around the speed of adoption of Business ByDesign. Is this a slower rate of adoption than you expected?

Hagemann Snabe: I think it’s fair to say we were a bit early in the market. That’s not a secret. I have been very cautious to set expectations wrong again. We did release the [Feature Pack 2.5 for Business byDesign] at the end of July, which means we’ve have had it on the market for two months. And we have significant growth and interest in the market. We’re still at low numbers because it’s a new product. 

The good news is that the customers that choose this solution have on-demand experience, and we typically see them moving from whatever they have today, whether that’s or NetSuite or other solutions, to Business ByDesign. That means to me we have a very competitive offering. On top of that, we have definitely the most modern infrastructure for on-demand. It’s in-memory based analytics, it’s mobile compatible. I believe we will see tremendous growth in the future. We are not disappointed. I’m very excited about what I’m seeing.        

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