SAP under the microscope post Agassi
The departure of SAP's Shai Agassi may not change much for the enterprise software company's daily operations, but the company is likely to be examined more closely now that its software architect is gone.
On Wednesday, SAP announced that Agassi is leaving the company. SAP then created an executive council and split CEO duties between Henning Kagermann and Leo Apotheker. There's no reason to believe that Agassi's departure signals something worrisome at SAP, but perception matters.
Dana Gardner sums up Agassi's impact well:
Agassi was the one a SAP you would see with the gleam in his eye, an indication that all was well nonetheless, that made you believe that SAP understood and would therefore — when the time was right — get it right.
If Agassi's duties are now going to be absorbed by a group of other executives, and probably not in the U.S., then this timing to major transition will likely slip into a defensive crouch. SAP will need to demonstrate otherwise swiftly if this is not the case. NetWeaver has not gained sufficient traction, while Oracle Fusion is sprinting out of the blocks. IBM is the mastermind of open source as a strategy and market maker (or breaker). Microsoft has a real "NetWeaver" in .NET/Windows System through which to deliver the packaged applications (not the other way around, as in SAP's case).
Other SAP watchers also touch on Gardner's point. In many respects, Agassi was the face of SAP in Silicon Valley and the U.S. Some other reaction on Agassi's departure.
We had an all hands employee meeting in Walldorf with Henning Kagermann, CEO and Hasso Plattner, Chairman of the Supervisory Board.
Hasso was visibly disappointed at Shai’s departure, and after all, given that he found and built him up as his successor, entirely understandable. He explained in detail the background to Shai’s decision. In Shai SAP has lost a charismatic visionary and external spokesperson. Good news is that he is not departing to a competitor, even though several approached him. He will still have an office at SAP and will advise Hasso, so it is hardly the unseemly departure some have painted it to be.
JMP Securities analyst Patrick Walravens:
The fundamental problem at SAP is that the product strategy is in disarray, in our opinion, as the company attempts to manage multiple ERP systems on multiple platforms in multiple programming languages. Our due diligence suggests Agassi may have been a casualty of the management's differing opinions on product strategy and direction. It also announced the promotion of Leo Apotheker to Deputy CEO and announced Agassi's development responsibilities would be spread among four executives reporting to CEO Henning Kagermann. As outlined in our note dated January 11th, this management shakeup may have been in the works for some time. SAP's move to distribute development responsibilities from one leader to four may drive the product strategy into further disarray, in our opinion. Our due diligence also suggests North America is trending below expectations this quarter, despite some large deals closing in the healthcare vertical.
It will also be up to SAP to make sure that the entrepreneurial spirit that Agassi brought to the company endures. Among just a few of his notable accomplishments was the growth of a massive ecosystem that has made SAP the company to partner with in Silicon Valley. Agassi also brought SAP into the platform business in a major way – one that has helped it square off against the rest of the Big Four: Oracle, IBM, and Microsoft. He made Duet, and thereby Office, the most sought after interface since the portal, and he pushed for a broad range of initiatives, some like SAP’s foray into SaaS, that are about to have a broad impact in the market, and others that we’ll be hearing about as the year unfolds. What’s perhaps most important for SAP to convey, and what will truly be the measure of this reorg, is if stability and entrepreneurship can be maintained.
SAP needs a person of Shai’s widely acknowledged charisma to take on the big Oracle PR guns. SAP doesn’t have that person right now and Hasso (Plattner) was quick to acknowledge the gap Shai’s departure leaves in that regard. However, when it came to questions about Oracle, Hasso returned to form: "They had a good quarter but they should be careful not to celebrate too visibly. Seven years ago, Larry (Ellison, CEO Oracle) said that Oracle would pass SAP in five years."
Jefferies & Company analyst Ross MacMillan:
Near-term we don't think a lot changes. But when Shai was brought into SAP, it marked the first time an outsider had won such a senior position to augur an aggressive strategy around product innovation. The worst scenario would be if this event marked a return to a more internally introspective period of product development at SAP.
This will be a major blow to SAP’s efforts in adapting itself to Enterprise 3.0. However, it is not an unexpected development, since it is hard to imagine Agassi’s brash style to be compatible with SAP’s culture. SAP has a very old-fashioned structure in every way, including compensation. Upside is not shared with employees except for a very small group in the absolute top management. There is hardly any concept of equity based incentives for the broader employee base, and Shai was one of the people who opposed this practice. In a market where the competition for talent is severe, SAP simply doesn’t offer a framework for attracting top talent.
Citigroup analyst Marc Geall:
The timing of the departure just before the quarter closes will raise questions over potential sales disruption in Q1. However, we do not believe that there is any short-term risk as Shai Agassi would not have been involved in a late stage closure of deals, that responsibility remaining with the account managers.
Given the aforementioned reaction, SAP's messaging at Sapphire next month in Atlanta should be interesting.