March 2, 2010 11:28 pm

SAP vows return to double-digit sales growth

Bill McDermott and Jim Hagemann Snabe, SAP’s new co-chief executives, promised on Tuesday that there would be a new culture of “fun” and “trust” at the embattled German software company.

In their first public appearance after last month’s surprise announcement of their appointments, Mr McDermott and Mr Snabe pledged to return the German software company to double-digit sales growth by 2012 and to restructure the company to make it more innovative and entrepreneurial.

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SAP’s core software sales fell 16 per cent during the downturn and Leo Apotheker, its former chief executive, left after one year in the job. The company, which competes with Oracle and Salesforce.com, has been criticised for falling behind on new IT trends such as cloud computing.

Speaking at the CeBIT IT trade show in Hanover, Mr McDermott and Mr Snabe said a key strategy would be reorganising the company’s more than 12,000 engineers into small entrepreneurial teams of 10 or so people, with more contact with customers and more control over their own projects.

Mr Snabe believes this will enable the company to innovate more quickly and efficiently.

He said: “We want to transform SAP into a lean organisation, doing more with fewer people. We want to unleash the creativity of our engineers.”

He estimated that the company could make a 30 per cent efficiency gain through the new structure, allowing SAP to keep research and its development consulting costs flat while accelerating the pace at which it brings out products.

He promised that SAP’s much delayed new software-as-a-service offering, BusinessByDesign, would start being shipped to the mass market in July. This is part of SAP’s effort to address the small and medium enterprise market better.

Mr McDermott said that SAP was also open to making more large acquisitions and “would not hesitate” if the right opportunity came up. SAP has not traditionally made big acquisitions, but bought Business Objects for €4.8bn in 2007.

Some industry observers suggest, however, that SAP could itself become a take­over target following its recent weak performance. Microsoft, for example, is understood to have considered buying the company in the past.

Mr McDermott reiterated SAP’s targets for 4 to 8 per cent core software sales growth in 2010, and a 30 to 31 per cent operating margin. In the medium term he said the margin would reach 35 per cent.

The toughest challenge for Mr McDermott and Mr Snabe will be overseeing a cultural change at a demoralised company. As the first foreign chief executives of the German company, this job is particularly tricky.

They say they would like to adopt a highly approachable management style, in contrast to the more hierarchichal structure that they said existed under Mr Apotheker.

Mr Snabe is Danish and the former head of product development. Mr McDermott was previously the head of field operations.

Both insist that Hasso Plattner, SAP’s co-founder who stepped back in to the company during the crisis, will give them plenty of leeway in the day-to-day running of the business.

“I believe that Hasso is the most brilliant mind in technology and he will play a role as a technology advisor,” said Mr McDermott. “But Jim and I run the company, and that is how Hasso and the board want it.”

“We used to present complex solutions, tackling the most complicated problems in 25 industries. Now we are trying to give more of a citizen’s point of view and talking about how SAP is relevant to what is happening in your kitchen.”

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