Bill McDermott Leaves CEO Position at SAP: Impact for SAPinsiders

Inside Bill McDermott Stepping Down and Christian Klein and Jennifer Morgan Stepping into SAP Co-CEO Roles

SAP CEO Bill McDermott announced yesterday that effective immediately he is stepping down from the helm of the German software company after nine years on the job.

During his near-decade leading SAP, McDermott steered SAP in several significant ways. The company began its transition to its cloud, snapping up over $20 billion of acquisitions while continuing to alter its revenue mix between cloud and on-premise software revenue as shown by its pre-announced financials released yesterday. The acquisition of Qualtrics brought a portfolio of experience management solutions and knowledge that have become a foundation of SAP’s positioning to bring experience and operational data together.

McDermott has also led the development and rollout of its SAP HANA in-memory database powering the latest release of its flagship ERP suite, SAP S/4HANA. SAP’s future lies in its installed base transition to the new release, the cloud and its ability to integrate experience throughout the enterprise.

As such, it’s no surprise that SAP’s top cloud executive is sharing the CEO role, which will be filled by co-CEOs Christian Klein and Jennifer Morgan. Klein previously served as SAP’s Chief Operating Office, while Morgan was head of SAP’s cloud business. Both are veterans of the organization. Klein began his tenure in 1999 while Morgan started in 2004. This is not the first time SAP appointed co-CEOs as Jim Hagemann Snabe and McDermott shared the role in 2010.

At its European TechEd event this past week in Barcelona, SAP reported that they have sold over 11,000 licenses for SAP S/4HANA. The market has believed in SAPs’ ability to transition its business rewarding SAP stockholders with a 75% appreciation in SAP’s stock price over the past 5 years.

SAP Leadership Trends

McDermott’s departure headlines a greater wave of change that’s been accelerating within the SAP executive and employee base marked by the exit of board member Rob Enslin who oversaw SAP’s cloud business and recently joined Google. The past year also saw a major staff restructuring that sent many SAP veterans to early retirement packages and forced others out as the company repositioned for the future.

SAP’s New CEOs: What Lies Ahead?

There are both challenges and opportunities awaiting SAP’s new CEOs. Among the top is incenting the rest of its core installed base to move to SAP S/4HANA in advance of the 2025 deadline ending support for core ERP. SAPinsider research shows that most companies are at least in the evaluation phase of their move, but still less than one-third have implemented or are in the process of implementing. One of the biggest hurdles is building the business case for this unique project. The good news is that our research reports that 85% of those companies making the leap are seeing results that meet or exceed expectations.

SAP has built a significant cloud portfolio of cloud-native solutions from their acquisitions of Ariba, Concur, and Fieldglass. Also critical is their focus on shifting legacy ERP workloads to the cloud from both existing and new customers. This along with cloud are clearly the directions SAPinsiders are moving. Our latest report shows that 92% of SAPinsiders are running some processes in the cloud, but many are still struggling with extracting the full value out of their cloud migration activities with nearly half reporting that either their cloud investments have not met their expectation or it’s too early to tell.  The largest reasons for this are lack of skills and underestimating the impact on costs.

What Does It Mean for SAPInsiders?

  • Prepare for a further acceleration of cloud-based solutions and offerings from SAP: The elevation of SAP’s top cloud executive to the CEO role shows an increasing commitment to cloud as a core strategy and is not surprising given its recent acquisition history and the general industry trends. Expect SAP to remain aggressive with their rollout of cloud solutions and services. SAPinsiders need to spend greater focus on building their own cloud strategy, knowledge, and skillsets.
  • Expect greater incentives and pressures to migrate to SAP S/4HANA: It’s been clear that the future of SAP rests in customers moving to both SAP S/4HANA and the cloud. No doubt that these new CEOs will continue to press forward on this campaign and want to start their tenure off on the right foot.
  • Don’t overthink the impact. The change in CEOs should not impact day-to-day operations. SAP is on solid ground financially and has plenty of resources. Expect them to continue to follow their core strategies of moving their installed base to SAP S/4HANA and the Cloud and increasing their use of SAP innovation-based technologies particularly in the analytics, data management, and data intelligence realms.

Focus Remains on Experience

Over the past few weeks, having the opportunity to attend both TechEds in Las Vegas and Barcelona, it became clear that intelligence, automation, and integration are at the forefront of SAP’s strategy. These concepts are the foundation of SAP’s Intelligent Enterprise Strategy and are focused on supporting  investing in four core end-to-end processes that include design-to-operate for finance and manufacturing design-to-operate:

1)      Total workforce management
2)      Source-to-Pay
3)      Lead to cash
4)      Design-to-Operate

Ultimately, experience will remain as a key underpinning of SAP’s overall cloud strategy. Qualtrics continued to get significant play throughout the past weeks’ TechEd events, and represents the cloud solution that unites SAP’s legacy history as an operational system and its future as an enabler of optimal customer experience. The unification of X’s and O’s will remain a strong theme for the immediate future.

Expect more experience management functionality to be rolled across all functional areas within SAP S/4HANA and other cloud-native SAP applications.

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