SAP Makes A Dramatic Move: Ex-Oracle Exec John Wookey To Head up SAP’s New On-demand Market Effort

It’s hard to know which was more significant, the announcement that SAP is going to tackle on demand at the top of its market, or the name of the person – former Oracle apps exec John Wookey – who was picked to lead the effort. Off the top of my head, I’d say it’s a draw: an almost amazing segue into a new, and very challenging market, and an amazing pick to head up the effort.

John won’t lack for challenges in his new job, the title of which is executive vice president for large enterprise on-demand. Having lead Oracle’s efforts to rationalize its ever-growing, and increasingly heterogeneous acquisitions until he abruptly left last year, John has some experience in accomplishing what looks almost impossible to do.

Why this job will be so hard only starts at the technical challenge of figuring out how to push the quintessence of on-premise software into the cloud. That may turn out to be the easy part of the job. And that’s saying a lot. SAP’s software portfolio is so huge, and so complex, that nothing in the cloud today remotely comes close to matching its capabilities or capacity requirements. In fact, that complexity probably signals one of the design goals of John’s team: don’t try to put it all in the cloud any time soon. Because it won’t be possible, period.

(That sentiment was echoed to me by Microsoft’s Dynamics team at their analysts’ meeting last week. With Azure, Microsoft’s new platform in the cloud set to launch next year, one of the things the Dynamics group is not doing is rush headlong towards hosting their full- blown ERP systems on Azure. Microsoft CRM, yes. But not AX, NAV, or GP: not yet, and, as they are currently constituted, not ever, either.)

The bigger challenge for John and SAP will be that elusive on-demand business model. Look at Salesforce.com’s margins (which are starting to look as negative as its stock price), and Netsuite’s struggles, and you can see what SAP is trying to avoid.

Mixed up in John’s mandate is the on-going struggle about how to rationalize SAP’s Business ByDesign mid-market on-demand product, which its users tell me is highly functional, and which SAP tells me still can’t run in a profitable fashion. And that’s before anyone figures out who will sell this and how SAP will keep BBD from cannibalizing everything else SAP sells. BBD isn’t a large enterprise product, so I doubt it will come under John’s bailiwick, but it’s impact will loom large over his efforts going forward.

Here’s where I think he’ll start first, and in many ways this is similar to what Microsoft told me about Azure and Dynamics: SAP’s large enterprise, on-demand efforts will likely start with running specific processes and services in the cloud that are both highly discrete and have a distinct value-add above and beyond the cost benefits of merely flipping on-premise functionality into the cloud a la Salesforce.com. That latter model eventually ends up in a price war, and flies in the face of SAP’s higher value market position.

Here’s what else I imagine John will get to do. Help guide SAP towards strategic on-demand acquisitions, which he will then have the pleasure (genuinely, I believe) of synching up with SAP’s on-premise and on-demand offerings (remember SAP CRM On-demand? It’s still out there, poised for a come-back this spring). Considering his integral role in the heady days of Oracle’s initial acquisition spree, I think John will be rather good at this.

Final point: John’s resurfacing at SAP says a lot about SAP’s perception of its own strengths -- and weaknesses – at a time of incredible uncertainty in the market. SAP clearly sees that there’s no time like the present to invest in the future, and bringing John Wookey on board is a remarkable vote for future success that SAP is willing to make at what otherwise might look like a pretty bleak hour for the global economy. The fact that the company went outside to find a high-profile executive to lead this effort is a welcome recognition that an infusion of some new blood is exactly what is needed for this critical effort. Hopefully John will be able to navigate the somewhat complex SAP culture and put SAP in the leaders’ circle in a market it can no longer afford to sit back and watch unfold without it. Regardless, it’s going to be a helluva ride.