SAP Board Turns CEO into Scapegoat, Fires Him, Keeps Old Strategy
The news that SAP (SAP) jettisoned Leo Apotheker (though the company is positioning it as a resignation, probably as a face-saving last favor to Apotheker) less than a year after promoting him from co-CEO to solo chief executive isn't a sign of righting the ship. It's evidence that the board is looking to blame someone when the company's long-term strategy isn't going to work any better now than it did before.
Last month, SAP, whose programs help companies do back-office work such as payroll, inventory management and accounting, said its fourth-quarter net income fell 12 percent to euro727 million ($995.3 million) because of difficult market conditions, but said it expected an improvement this year.SAP has been sucking wind for a long time, financially kept afloat by its customers need for support. The software is largely monolithic, and most companies that really need big scale ERP software made their choice long ago about which vendor to use. It's not a growing market. Additionally, there's the danger of the hosted software model. Outsourcers already run ERP systems for customers, and the whole Software as a Service/cloud model could be even worse for vendors like SAP. Companies can buy what they actually need, and not enforced bundling that had historically driven vendor revenues.
One of the explanations for the switch is that the company had gotten nowhere in an online strategy, at one point last year trying to position its Business Suite 7 product as an SaaS offering, letting customers choose modules they wanted. But that was just an attempt to put off the inevitable. The company is in a position where trying to placate customers is not longer going to work. So what does its board do? Fire the CEO and install co-CEOs again. Maybe the board thought that this would give them a choice, trying out both people and picking the best. Just like it did with Apotheker. But in the meantime, there is no single point of leadership and no one person who can make the ultimate decisions necessary, ensuring that the necessary changes will never happen.
Image via stock.xchng user NightLord_, site standard license.