News Analysis: SAP’s CTO Vishal Sikka Resigns, What Does It Mean For SAP Customers?

Published on May 4, 2014 by R "Ray" Wang

Departure of CTO Signals Change In Long Term Direction

In a press release this morning, SAP announced a management reorganization and the departure of Vishal Sikka, SAP’s executive board member of products and innovation and CTO.   The reorganization puts Bernd Leukert as Vishal’s immediate replacement to lead global development.  The role of CTO has yet to be determined.  Meanwhile, the Supervisory Board has also appointed Rob Enslin and Bernd Leukert to the company’s Executive Board.  As announced a year ago and hinted by insiders, co-CEO Bill McDermott is expected to be officially appointed sole CEO at the May 21st board meeting, given Jim Hagemann Snabe’s pending departure.

Figure 1. Vishal Sikka At Constellation’s Connected Enterprise 2012

Source: Constellation Research, Inc.

As SAP’s CTO, Vishal served as the outward and inward face of innovation within SAP (see Figure 2).  He was tasked with renewing not only the legacy software company’s platforms, but also the internal culture of innovation.  His most notable accomplishments include a design thinking approach to software development, the SAP HANA platform, and the push to cloud and mobile for SAP.  Sikka was successful in re-elevating SAP’s relevance as an innovator.  More importantly, he showed that SAP could innovate outside of Germany, build a culture of innovation, and set a new course free from the constraints of dependency from competitors. 

Figure 2. Vishal Sikka Evangelizing SAP HANA

Source: SAP, Interwebs

The Bottom Line: SAP’s Relevance As An Innovator Remains In Question

Whether the shakeup is related to future CEO succession, platform vs apps,  or related to ideology on open source adoption, SAP customers must wonder whether or not SAP will remain committed to innovation.  What was dubbed as “Timeless Software” over the past 5 years has evolved into “Timeless Reorgs”.  Consequently, the hard work to build a culture of innovation requires much investment, but the pay off is significant for customers and SAP.  Bernd Leukert’s focus on applications may bode well as the SAP HANA platform has had much investment and has achieved a level of stabilization and scalability for use across SAP.  However, the relentless pressure from start-ups and established cloud companies such as Salesforce and Workday nipping at the core base requires SAP to provide a cogent and coherent technology vision and leadership.

Given that SAP’s executive bench is now filled with sales and marketing talent and fewer technical folks who understand how core technology can transform SAP, this puts pressure to find a new visionary that can interpret Chairman Hasso Platner’s visions while balancing the market’s need for 30 to 40% year over year growth.  Constellation’s Board of Advisor and Diginomica founder Dennis Howlett asks three relevant questions?

  1. What happens to product strategy?
  2. What about cloud and mobile?
  3. How stable is SAP?

Clients, partners, and prospects have also been asking Constellation the following questions:

  • Is SAP still committed to pushing the limits of innovation?
  • Does SAP seek to stand out in mind share?
  • Will SAP appoint another CTO with similar stature?
  • Has the board made a shift towards applications over platform?
  • Will SAP increase acquisitions versus investments in building more products?
  • Does this signal a focus on execution over innovation?
  • Will the SAP Labs organizations retain the authority to innovate?
  • Why has this happened so suddenly?

SAP customers and partners want to understand how SAP will prioritize innovation.  Moreover,  customers want to know who will lead these efforts.  With SapphireNow, SAP’s flagship customer conference just a month away in June, Constellation believes that SAP will have a lot of hard work ahead of itself to show not tell how innovation remains a priority and what business impact this will have on customers and partners.  Customers, prospects, partners, and influencers will have to wait and see as much remains to be answered and those decisions may take the management team more time than customers have patience for.

Follow the full coverage at the Constellation Research site

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  • Chandra

    Great thoughts. When your CEO and board have to make a 30 to 35% margin and year over year growth numbers, the easiest thing to do is acquire an put product into pipe. This is what large mature legacy software companies do. But when the company is seen as no longer innovative, that’s when you have a huge issue. Let’s see what Bill McDermott does without someone leading innovation as visibly as Vishal.

    R

  • Josh

    Thanks for your comemtn. that’s always the case especially in legacy software companies. However, not being perceived as innovative was what put SAP in it’s original funk after Shai left. The same thing is happening here with Vishal’s departure. In tech, if you aren’t seen as innovative and executing on innovation, you are just a has been. What do you think?
    R

  • Executives leaving is not a big deal in a large, established, traditional companies like SAP, especially if the executives are not “client facing” or sales leader. Vishal, despite all his contribution was not a sales leader, though certainly a visionary. Therefore, the impact may be felt from a very long term basis, however, till then so many other disruptions would have taken place that it would be impossible to put any one reason (e.g., Vishal leaving) as the main driver of the problem. Most of the cloud leadership in SAP (e.g., from SuccessFactors) has anyways left it. I doubt SAP is losing any sleep. That is because CEOs are incentivized to see “short term”, despite whatever technology visionary role they may pretend to be doing. Therefore, the CEO will cut cost or do something to increase share price, get its stock bonus and exit. That is the truth of most enterprise software vendors.

  • SAP must understand the future is on Mobile and cloud. SAP tools are weak compared to open source platforms like Angular,Jquery, Jquery mobile etc. SAP must concentrate on functionality NOT ON Technologies.

    SAP must plan to integrate with open platform technologies inside SAP ABAP platform. SAP still 10 year old UI tools – like WebDynpro, BSP HTMLB and it is not HTML5, Not work on cross browsers, and it is responsive.

    In fact we integrated Jquery with BSP, Look at Bizenithdotcom for more info.

    Regarding HANA, SAP must make concept simple and it is difficult to understand. Look at Qlikview which is also inline memory, which is very easy use and to understand.

    SAP must stop buying product companies and they waste time on integrating them, instated they must concentrate on developing similar product.

  • Rick

    Wise words. Another thing you have to do is agree on what each other won’t do in partner strategy.

    R

  • @Kurtgrela : A piece of friendly advice from someone who has been an SAP partner (multiple times), acquired by SAP, acquirer at SAP, and SAP partner again post SAP (phew, that’s a lot): do NOT bet your business on the whims of SAP (or any) partner or technology strategy. These types of things are notoriously fickle and prone to the way the political and power winds are blowing that day. Build a viable business which can survive and standalone with or without SAP.

  • My Platform versus Application experience.

    Signed up for SAP HANA Bootcamp!

    + Decide I want to build mobile MRP.
    + Built a POC, needs a RESTful HANA interface.
    + SAP sales pressure increasing like the Mafia.
    + PM struggles to understand interface I’m asking for.
    + Invited SAP Palo Alto Labs. Presented.
    + Answer. We’re gonna build that not you!

    Not a happy HANA ending.
    https://twitter.com/iC/status/254276671698505728/photo/1

    Tried Bootcamp again, still the same, HANA reminds me of the Sopranos:

    Dad are you in the Mafia…No!

    HANA are you really an application…No!

    http://youtu.be/Y0mo8Rmu6AI

  • Transformation is difficult in established and profitable megavendors. Incumbents like SAP have the ability to adapt through this “strategic inflection point” period. It requires feeling the pain of market shifts where cloud computing is the biggest manifestation.

    Major enterprise software vendors seem to have cushioned the pain through acquisitions. It’s as if innovation had primarily become an acquisition exercise. Yet, it doesn’t seem possible to acquire enough companies fast enough or to integrate those acquisitions adequately.

    My sense is that there has been significant R&D in the megavendors but that the implication of this work was business model cannibalization. At the same time, the application and middleware acquisitions require significant engineering expertise. This focus on integration and packaging is done at the expense of net-new disruptive innovation efforts.

    HANA includes some potentially disruptive elements such as scaling OLTP requirements and some packaging/integration to support SQL and legacy ABAP code and providing a relatively comprehensive big data solution. It’s also conceived as a platform for the cloud. This is the kind of incremental innovation one expects from incumbents. But, this intense focus on HANA as the poster child for SAP innovation has been detrimental. The marketing hype seems out of proportion to the adoption reality. (And, seriously, what would make anyone at SAP think that existing customers who buy Tier 1 ERP to manage perceived risk would leap at using a new platform that requires re-training, new equipment, code changes etc.?)

    SAP has also shot itself in the foot by presenting almost any feature improvement as “innovation.” The market is suffering from “innovation overload.” I wonder whether the majority of SAP customers want “innovation” at all – where new platforms represents risk. It’s one thing to burdent the complexity and time for typical ERP upgrades, it’s another to upgrade platforms.

    The lack of customer uptake could be interpreted as something wrong with HANA or cloud acquisitions by management when it could be the reasonable delay as customers understand, experiment and budget. This shifts blame away from PR over-promising to the technology innovation spokesperson.

    HANA does mask the ERP Achilles heal: the legacy proprietary code base – ABAP, PL/SQL etc. Legacy code carries a significant engineering burden that makes cloud support, vertical extensibility and intra-suite integration very difficult. Each acquisition adds to the network effect of engineering complexity.

  • Kurt,

    great points. we see it harder for large enterprise software firms to make the shift as the armies are what give them sales and the ability to be selling machines. glad to know how the startup focus program is helping you get product to market faster!

    R

  • Hi Ray

    I agree: “SAP is facing classic challenges. Platform versus Application. Build versus Buy. Innovate versus Execute.”

    I wonder what Hasso Plattner will do now? Has he been isolated now?

    Regards
    Trevor

  • SAP is too focused on million dollar implementations and feeding the established food chain that comes with it.

    HANA is transformational innovation. Very disappointed to see Vishal leave SAP. I just took his OpenSAP HANA course. I am a huge supporter of the OpenSAP class material. It’s producing high-quality content.

    As a SAP Startup Focus company @P4GlobalHealth, I am not interested in building a basic app. I am looking to build a platform by leveraging SAP Business Suite on HANA and configuring it for global donors who support the global health industry. The industry is leaning toward open source software, yet SAP has 95% of the solution and can’t break into the market because SAP is priced out. The industry may not buy SAP because it may not meet all of our needs, or not ready to support our requests for improving it. Therefore, I seek to build it myself. I want to treat SAP Business Suite on HANA as a foundational operating system, and place my ecosystem on top of it. Then in order to get access to the Platform for Global Health ecosystem, my subscribers will pay a monthly subscription fee. I expect more than 10,00 users in 5 years, and the elimination of all these fragmented software implementations that plague developing countries from developing into developed countries.

    I see the SAP pricing model shifting from hidden pricing to the SAP Marketplace, where pricing is publicly available. Besides apps, I think there is potential to resell industry ecosystem environments. Imagine buying my ecosystem, the Platform for Global Health, for $99 per month. Like other app stores, SAP gets 30% of the price for every subscriber.

    In all, developers like me are bringing new SAP customers, who would have chosen other options. I do see SAP dropping its million dollar implementation model and embracing the Ariba SaaS model along with an App Store, which is the enhanced SAP marketplace. Transparent pricing is a necessity. There won’t be much room in the food chain for people selling software licenses if there is no preconfigured environment that can be activated within 24 hours.

    @kurtgrela

  • Hi Steve,

    Not sure what you are trying to say about hexdata. But, I don’t think folks will buy HANA in the long run. The apps will come with the platform. There are other databases out there like Mongo, Postgres, and Couch that can also serve similar purposes in platforms.

    R

  • Richard,

    Thanks for your comment. SAP is facing classic challenges. Platform versus Application. Build versus Buy. Innovate versus Execute. I think Vishal and Hasso were on one side with the rest of the board on the other. I’m sure more will be revealed over time but being relevant is key in tech. Irrelevance will cost you mindshare which just means you are left to whittle and die =)

    R

  • As a former employee of SAP I can say that I was a fan of HANA and was always happy when folks like Vishal and Jim Snabe took the stage to lay out the future vision without the hype and hyperbole that sometimes comes from sales leaders.

    However I believe that SAP was not able to move quickly enough to truly drive innovation and that was part of the reason for me moving to a new smaller company without so much of the middle management “drag” that slowed down so much of what SAP was trying to do.

    Innovation needs to be driven from the bottom up and the top down….without the intransigence of a huge mass of people in the middle committed to maintaining the status quo and blocking that innovation either consciously or unconsciously.

    Perhaps Vishal saw that the inertia of the middle was insurmountable?

  • your analysis is weak R “Ray” Wang. why buy HANA w/ H2O Open Source In Memory engine from 0xdata @hexadata

    @sardire

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