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SAP’s McDermott: In-memory technology ‘limitless’

SAP co-CEO Bill McDermott talks about the Amazon service outage, the future of in-memory technology, and why he thinks SAP is always a target of acquisition rumors.

As the first quarter of 2011 comes to a close, SAP co-CEO Bill McDermott talked with about why he thinks SAP Business ByDesign finally has momentum, what Amazon EC2’s recent service outage says about the stability of cloud computing, and what he thinks of some customers who get their maintenance and support from third-party vendors.

SearchSAP: Your co-CEO Jim Hagemann Snabe said on the Q4 earnings call last year that he hoped to have 1,000 Business ByDesign customers by the end of this year. SAP cited a similar goal in 2007 of having 1,000 ByDesign customers by the end of 2008.  What makes things different this time?

McDermott:  When we stated it that time, we didn’t have any customers. This time we said we’d have 400 by (this year’s) Sapphire conference and we already have 400, before Sapphire. So we’re ahead of our own internal guidance with the 1,000 [customers] by the end of the year.  The product is a real product, and customers like it. It’s performing very well.  I don’t think we’re going to have a challenge in getting to 1,000.

SearchSAP:  With the recent outage of Amazon’s EC2 cloud, what do you feel that says about the stability of cloud computing, and how might that influence SAP’s operations, given that Amazon is one of SAP’s cloud platforms?

McDermott:  We’ve always felt that the world is a hybrid world where customers are going to run applications on-premise, they’re going to run applications in the private cloud. To some extent, they’ll run them in public clouds. The most important thing is these environments are secure at the process and the data level. SAP’s applications are.   

SearchSAP:  We spoke with one customer that sees third party maintenance vendor Rimini Street as their maintenance partner and SAP as their purchases and upgrades partner.  Are you comfortable with that situation?  Separately, can you give us an update on the progress of Enterprise Support?

McDermott:  Enterprise Support, as you know the whole history of it, once [SAP co-CEO] Jim Hagemann Snabe came in, we provided choice for the customer. We believed then, and we still believe now that Enterprise Support was the best value for our customers.  But we recognize that some customers want choice, and we gave them the standard support offering.  More than eight times out of ten, the customer chooses Enterprise Support over Standard Support.

SearchSAP:  Can you answer the first part of the question [about Rimini Street]?

McDermott: Look, at the end of the day, customers get choice. That’s what this world’s all about. That sounds like a very rare and unique instance.  I’d love to understand it better. I certainly don’t see that as any kind of a trend.

SearchSAP:  You mentioned in an earlier interview that the HANA pipeline is in the triple digit millions with the strongest demand in Japan. Do the recent events in Japan change any of that?

McDermott:  If you look at the Middle East this quarter, with all the dislocation going on there, it was still one of our best quarters ever in the Middle East. If you look at the crisis in Japan…we had one of the best quarters ever, where we grew 92% year over year. In the same quarter, Japan was the country that adopted HANA faster than anywhere else.  Another thing that I learned,  because they were on the SAP system, as their supply chains were disrupted, they had war rooms set up using the SAP system to compensate for the supply chain disruption. They were very agile in the way they were able to execute.  That really propels our business.  It leads to a lot of good will towards the [SAP] brand.

I really think the world is an uncertain place. But people are learning to navigate in this uncertainty, and execute through the uncertainty. I think this is a new paradigm in business.

SearchSAP: What’s coming after HANA?  What’s the next big thing? 

McDermott: When you think about in-memory and the user, it has a lot of room to run because it can completely disrupt the disc-oriented database technology and change the industry together.  It’s kind of limitless to where we can take this technology. The good news is that we have it, and nobody else does, at the level we do.

SearchSAP:  Why do people always consider SAP a target for acquisition for another company? 

McDermott:  It’s really in one sense a compliment, that there are other companies out there that would likely see us as beautiful jewel in their crown. But the reality is SAP is truly an innovative business software company. What’s different about SAP and why the rumors have been going on, but never executed on, is that we like the fact that SAP is independent. Our customers like that.  Our ecosystem likes that.  They [all] believe they’ll get a more innovative SAP out of an independent SAP.

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