Business Today

"We are in the midst of a once-in-a-generation transformation"

Over the past four decades, SAP established itself as the proverbial 800-pound gorilla of the enterprise software market, despite competition from the likes of Microsoft and Oracle.

Rahul Sachitanand | Print Edition: September 5, 2010

Over the past four decades, SAP established itself as the proverbial 800-pound gorilla of the enterprise software market, despite competition from the likes of Microsoft and Oracle. However, its dominance has been undermined by new competitors such as, whose platforms are run off the Internet (or on the cloud as it's called) and are being adopted rapidly by mid-tier and small enterprises. SAP's own cloud-based platform has been delayed and the company's board reacted sharply, ending former CEO Leo Apotheker's contract and reverting to a joint CEO model with Bill McDermott and Jim Hagemann Snabe.

SAP's rivals haven't been shy of baiting a stuttering giant, with Larry Ellison, founder of arch-rival Oracle, calling the company's latest in-memory technology (which seeks to lower costs by storing data on the latest memory chips) "wacko, ridiculous, complete nonsense". The board turned to India-born Vishal Sikka, SAP's Chief Technology Officer, to overhaul product lines and help revitalise the Walldorf, Germany-based company, which reported reveneus of $14.1 billion in 2009. Sikka talks to BT's Rahul Sachitanand about his plans. Edited excerpts:

SAP has recently reverted to a joint CEO model and elevated you to the board. What is the new SAP about?

I think the technology world is going through a once-in-a-generation transformation. For us, this transformation happened at the same time as the top leadership was changing. A generation of leaders had left the company and we have just begun to emerge from the economic slowdown. We had a new board, with new CEOs and two new board members. In many ways we are going back to our roots of innovation. There is now a lot of difference in speed and innovation; we are talking about delivering products in six month cycles, not years. We focus on agile and lean software development technologies. We are getting rid of the bureaucracy and power point culture across the company. We've made aggressive acquisitions of Sybase and Business Objects to double our addressable market from $110 billion to $220 billion.

In terms of product innovation, especially in cloud computing, do you think SAP was slower to catch on?

There was a delay in the mapped release of our platform called Business ByDesign. However, I would not say we were late in realising the potential of the cloud. We have taken our time to understand what cloud transformation is all about. There is a major disruption towards mobility. This is backed by larger, more efficient, and easy to operate data centres and a massive improvement in hardware and processing capabilities.

What does working on a cloud mean for your customers?

We believe medium-size enterprises can run their entire business from the cloud not just small pieces like salesforce automation but entire critical business processes. Larger enterp rises , however, will continue to have on-premise software systems. There will be complementary solutions. I think companies such as have been quite successful and that is admirable. Every once in a while when you cover a geography as large as ours - every business process across 120 countries - there are some gaps for some companies for a few years.

Where does this place SAP?

We are the leader in enterprise applications. However, we don't believe in owning a huge, inter-galactic stack of software applications. Customer landscapes are heterogeneous. They never have a landscape of one company's products. We work with an ecosystem of companies. We don't believe in buying second grade hardware companies.

Everyone else seems to be talking of consolidation…

This happens every once in a while. I have never met a customer who standardised the stack. We don't believe this is the correct direction. There is a unique opportunity to provide value to customers. We are good partners with Oracle - we run Oracle databases and use Java, too, even though they are our biggest rivals. We are happy being the best at enterprise applications.

Can you define the technology focus at SAP for us?

If you are the world's largest provider of enterprise applications, the size of the platform to serve these applications has unique dimensions. We have learned over the past 38 years that software needs to be interoperable, often across generations. We believe that continuity and coherence is a fundamental need - our customers like to evolve, but without disruptions. You need the ability to serve applications without disruptions. Computing advances (across memory and processing power) allow us to, for example, analyse a retail firm's data in real time, using not two-or-three-month old data, but real-time data. We have rewritten the data management software, unlike database vendors, whose technology is at least 20 years old.

Where does India fit in?

India is a fundamental part of SAP. Not only in the lab - which employs 4,000 people - but as a market. Indian companies are growing into global corporations and we are helping them grow with our software. The lab in India (SAP labs India) is as innovation centre. We do development for for India and we are bringing in lessons we learn here for the global market. One of the big things the new board did eas establish crack teams called game changers to deliver breakthrough innovations rapidly.

How is an emerging market, like India - where you crossed $1 billion in sales - different from mature marketsforSAP?

We do a lot of localisation of our products for the Indian market, not only in language support, but adapting laws and best practices for the local market. We are working on a project for India in India focused on small retailers and marginal farmers. We do a lot of things around Business ByDesign, the cloud platform, too, in India.

Do companies such as SAP have a larger role in developing entrepreneurship and innovation here?

The ability to develop products must come naturally for India…we must be able to undertake tasks that require more creativity. SAP can bring in the competency of building world-scale products and we can play a fundamental role in helping the bottom billion break through. Two-thirds of the world's GDP goes through a SAP system somewhere.

Do you see SAP's results - a 15% rise in quarterly profits - as a sign of global recovery?

I would not say that; it is still early. We are seeing signs of things stabilising, but I would not identify it as a pattern of sustained growth. We saw the negative consequences of what happened in Europe. I would not say the worst is over and things have improved since the dark days of 2008.

What happened to SAP's R&D budget in the slowdown?

We left the R&D budget untouched. It has continued to grow despite the circumstances.

Has the US lost its edge as a global hub of innovation?

Innovation is becoming global, but the role of the United States as the leading innovator is not in question. There have been encouraging signs from India, China and Israel, but the sheer amount of innovation in Silicon Valley is actually accelerating. It is easier for companies there to be set up and tinker with new ideas. India has a great shot at becoming a leading global innovator given the sheer amount of intellectual horsepower.

Now that you've been appointed to the SAP board, are we looking at the next CEO or joint CEO of the company?

(Laughs.) I am looking at products and technology. I am responsible for innovation for SAP, which is a hell of a job. So you do get involved with issues of scale and business. But, as some people say, this is more than a full-time job. 

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