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This week SAP made a surprise move to oust its chief executive Leo Apotheker and replace him with two co-CEOs. Officially the word is that Apotheker has resigned, but the company also acknowledged that it decided not to renew his contract.
The German software giant said the company would now return to a split leadership with Bill McDermott, head of its field organization, and product development chief Jim Hagemann Snabe, sharing the helm.
Apotheker had been with SAP for 20 years.
On the surface, the decision seems to be about poor financial performance. Like many other traditional software companies, SAP’s results were hammered in the recession. Its net income fell 4% in 2009, while revenue from software and software-related services dipped 3%. Under Apotheker’s leadership, SAP had to announce job cuts of close 3,000, a first in the company’s history.
The company did manage to stage a pretty solid comeback in the fourth quarter of 2009, but by then it didn’t matter. The decision to get rid of Apotheker wasn’t really about financials; it was about appeasing the company’s customer base.
Back in 2008 SAP announced that it planned to move some of its customers to a more full-featured – but pricier support package. The move came at a time when many of its customers were trying to weather the recession on tight IT budgets, with little room to maneuver.
It also upset some of SAP’s long-term customers, with older, stable systems that didn’t need support with all the bells and whistles.
With its customers mounting an aggressive and vocal challenge to the fee hike, SAP delayed the program in 2009, acknowledging that the timing wasn’t best. Then, in January of this year, SAP said it would bring back its standard support model and would hold maintenance prices at 2009 levels.
The move went a long ways towards restoring customer loyalty, but clearly SAP’s board of directors wanted to make sure it was doing everything it could to repair the damage.
Chairman Hasso Plattner said in subsequent interviews following the CEO announcement that customer trust played a role in the decision, but there were other factors as well. He acknowledged SAP has been slow to catch up with some industry trends such as software-as-a-service and cloud computing. He also indicated that relations needed to be repaired with employees.
“I will do everything possible to make SAP a happy company,” he said.
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