Enterprise Software at the Crossroads: Lost Execs and Lost Ground

What’s up with the top enterprise software companies and their leadership? In the space of six months, Microsoft, SAP, and most recently Oracle, have lost their most visible executives in a rather abrupt fashion. While the reasoning for the departures is, on the surface, vastly different in each case, the fact that all three have been hit by abrupt management departures and the ensuring disruptions may not be as coincidental as it looks.

First, the gory details. Microsoft started the trend with the shifting of Satya Nadella from the head of its Dynamics division to a new post heading up Microsoft’s hypercritical search business unit. This was the only management change that at the least was a decent lateral move, though I wouldn’t be surprised if more than a few Microsofties thought that Satya nailed a serious promotion in the process.

This opened up more of a leadership vacuum at Microsoft than may have been apparent at the time. Satya’s departure – having been on the job maybe six whole months – coincided with the final departure of Doug Burgum, the former head of Great Plains who headed up the initial Dynamics team. Shortly after Satya left, Dynamics veteran Tami Reller left, after having been promoted to acting head of Dynamics but no further. Tami was followed several months later by the departure of James Utzschneider, who was the spearhead for Dynamics marketing efforts and the most incessantly visible member of the team.

All of which meant that those of us who attended the Dynamics analyst conference this week in Redmond found relatively few familiar faces at the top, and a lot of new ones, starting with the new boss, Kirill Tatarinov, a former BMC exec and now a bona fide Microsoft insider. More on the impact of all that newness in a minute.

Whereas Satya left his job at Dynamics right after their big user conference, SAP’s Shai Agassi abruptly resigned weeks before SAP’s Sapphire user conference, making the conference much duller for his absence but much more interesting for all the scuttlebutt about the “post-Shai” era that swirled around the show floor. Shai’s departure was followed in the ensuing months by the departure of not a small number of his top hires and insider men and women, with more probably to come. And while the ranks of SAP were deep enough to ensure that, from an internal management standpoint, SAP was able to fill the gap left by Shai’s departure, from an external standpoint there is still no single person in SAP – on this side of the Atlantic, at least – who can dish and discuss and opine on SAP and the industry the way Shai could, much to the impoverishment of the entire industry, and not just SAP.

Which brings us to the as-yet unacknowledged departure of John Wookey at Oracle, one of the unsung heroes of the entire industry. I say unsung because under his leadership Oracle has produced a major miracle, which is the successful management of a half-dozen different product lines better than they were run back when these products – PeopleSoft, Siebel, JDE, among others – were actually standalone companies. Wookey had a lot of help along the way, but I give him credit for the leadership that made it happen, despite the warnings from people like myself and others that this was largely impossible.

(A side note as to the timing of Wookey’s departure, which was a month before Oracle’s big user conference. All you top software execs take note: user conferences are dangerous to your job tenure. You heard it hear first.)

So, three major shifts at the three top enterprise software companies: Where does that leave the industry? If we look at Microsoft’s example, bloodless though it was, what we see based on the discussions I had at the analyst conference is a Dynamics division that is very much in stabilization mode. Kirill has some good ideas for the future, and there’s a lot of important new development going on, but with so much management change – Kirill has been on the job 100+ days at this writing – what we analysts saw in Redmond and what the customers in Europe are going to see next week at the big Convergence user conference in Copenhagen is caution bordering on the boring. What they won’t see is a Dynamics team that is ready to start leading the market: that, we were promised, will come by the U.S version of Convergence next spring. Meanwhile, caution rules the day at a time, I would argue, when there’s very little time for the luxury of caution.

At SAP, there’s been some bold direction in the form of the Business ByDesign announcement, truly bold and innovative, but there’s also a sense that SAP is still in reset mode, trying to figure out how to divide up all of Shai’s responsibilities and sort out the on-going tension between headquarters in Walldorf and the Walldorf-west operations that Shai helped spearhead. Is it a coincidence that SAP’s U.S. growth has been less than stellar in the last two quarters? Maybe, though I tend not to believe in coincidences, even the most spurious too often turn out to be true. Suffice to say that Business ByDesign did a lot to keep SAP on the innovation map, and the acquisition of Business Objects shows a determination to be bold, and even a little incautious. But six months after a major management change, SAP is still trying to sort it out, and until it does there will continue to be this lingering je ne sais quoi hanging over the company.

With the examples of Microsoft and SAP before us, what can we expect from Oracle’s abrupt leadership change? Will its enterprise software strategy go all cautious and boring, or will it try for the innovative and uncertain option? Or somewhere in between?

One big question is whither Fusion Apps? The rumor-monger who first broke Wookey’s departure story, my friend Vinnie Mirchandani, also speculated that Fusion Apps were going to be delayed by a good year or so. I personally don’t believe that, for the simple reason that Oracle has the option to scale up or down its Fusion Apps 1.0 release as it sees fit, and without a hard and fast set of specs that it has been publicly developing towards, Oracle can declare Fusion Apps “delivered” on schedule regardless of how much it actually delivers next year.

If some version of Fusion is still on target, my personal bet, then Oracle will take the innovation/uncertain route. Uncertain because, while, like SAP, Oracle has a deep bench with which to fill Wookey’s responsibilities, it will be hard pressed to fill his shoes directly. While unlike Shai in every possible way, Wookey was equally as unique, and I predict that it will take Oracle a lot longer to sort out the ensuing vacuum than anyone at the company would like.

So is this all a coincidence, or is there something in the water in the enterprise software market? It’s hard to imagine enterprise software is more of a pressure cooker than other parts of the industry, but there are no rivalries like Oracle vs. SAP today, and therefore I think it possible that Wookey and Agassi left for reasons that were more similar than different. Microsoft is the outlier here, but only on the departure side. Like its two big rivals, Microsoft now has to prove that the new management is even better than the old, however good the old was. Because it will be up to the new management across all three companies to navigate a serious increase in competitive pressure as Oracle, SAP and Microsoft all vie for each other’s customers and a similar set of new prospects.

More then ever, it’s show time for all three companies and their new executive management. Failure to excel over the next six to 12 months will ensure that more executive heads will role, or worse. The industry truly is at a crossroads, as are its executives, new and old: The markets are watching, the customers are watching, and the ecosystem partners are watching. So grab a chair and enjoy the show. It’s going to be a helluva year.