In a shock announcement Bill McDermott said that he would not be renewing his contract with SAP and would stand down as CEO. Jennifer Morgan and Christian Klein, both SAP executive board members, were appointed as co-CEOs following McDermott’s departure. Morgan is based in the US and comes from a sales background and was previously president for the cloud business while Klein is based in Germany and comes from a product background, previously holding the CTO role.
Under McDermott’s leadership SAP has grown its revenues by 138 percent while spending nearly $70bn on acquisitions – the most recent and notable was the $8bn it spent on Qualtrics earlier this year. McDermott has overseen a huge shift in strategy and focus at SAP as it moves away from being purely an ERP vendor into a much more rounded digital vendor with its cloud platform, HANA database and a broad portfolio of offerings which include supply chain through its Ariba Network, expenses management through the acquisition of Concur, HR with the addition of SuccessFactors, and experience via the previously mentioned Qualtrics.
There was much speculation surrounding the reasons for McDermott’s announcement; some have surmised that its ‘activist investor’, Elliot Capital, has been rattling the cage and pushing for more dynamic leadership and high values for shareholders. Others have suggested that the integration of all the acquisitions, and the pressure to demonstrate customer and shareholder value, has put too much pressure on the exiting leader. Although Elliot Capital has a track record of ousting CEOs it is a minority shareholder in SAP with less than one percent of the equity – and although one percent of a company the size of SAP is a significant holding – it’s unlikely that McDermott would fall on his sword over a little pressure from an institutional investor.
As we went to print news surfaced that McDermott had agreed take over as CEO at ServiceNow later in the year – it’s not clear whether this move was the catalyst for McDermott’s departure from SAP or whether John Donahoe’s move to Nike presented an unexpected opportunity. Either way, ServiceNow inherits one of the world’s most accomplished leaders and McDermott said, in an official statement: “ServiceNow is one of the most exciting innovation and growth companies in the world. The company has a transformational platform, immensely talented colleagues and limitless potential. I consider it a personal honour to succeed John and help carry ServiceNow’s proud legacy forward to the next chapter. I’m fired up and can’t wait to get started!”
Commenting on his departure from SAP, McDermott said that, ‘every CEO dreams of being able to transition a company to its next generation from a position of significant strength’ and while it is true that SAP’s numbers on most fronts are impressive – they do have several key issues to overcome while they transition themselves to a new-world enterprise leader.
McDermott’s departure comes hot on the heels of several other high-profile changes and departures. Rob Enslin who led the cloud business went to Google. Barry Padget was the president of several of the acquisitions (Concur, Ariba and Fieldglass) and is now CRO at Stripe. And Darren Roos who headed up the global ERP business and is now CEO at IFS.
SAP is under pressure to deliver several key areas of its strategy; how to become a cloud-first company, how to light the fire under S/4HANA and, most significantly, how to integrate their latest acquisition, Qualtrics, which was very firmly a McDermott acquisition. There’s plenty to do for the two new CEOs.