Leading business-software maker SAP AG (NYSE: SAP) on Monday announced a strategic shift in the corporate suite. Léo Apotheker has resigned as CEO and member of the SAP executive board, effective immediately. The abrupt decision came as part of a "mutual agreement" with the company's supervisory board not to extend Apotheker's contract as a member of the executive board.
Apotheker joined SAP, which is based in Germany but well-known worldwide, more than 20 years ago. The company didn't offer details on severance or his future plans.
His replacement came quickly with two co-CEOs: Bill McDermott, head of field organization, and Jim Hagemann Snabe, head of product development. Both are already executive board members. In addition, Chief Technology Officer Vishal Sikka has been appointed to the board.
Ready to Return to Growth
SAP, which is best known for its CRM (customer relationship management) and ERP (enterprise resource planning) software, is shoring up its executive direction during the transition. At the request of the supervisory board, Hasso Plattner, cofounder of SAP and chairman of the supervisory board, will play a "strong role" in advising the new leaders on technology and product development.
"The new setup of the SAP executive board will allow SAP to better align product innovation with customer needs," Plattner said. "The new leadership team will continue to drive forward SAP's strategy and focus on profitable growth, and will deliver its innovations in 2010 to expand SAP's leadership of the business software market."
The moves come just more than a week after SAP's fourth-quarter earnings report was released. The company's software-related service revenues were down five percent, service revenues were down 15 percent, and overall revenues were down nine percent.
During the announcement, Apotheker seemed optimistic, saying the company was ready to return to top-line growth. "Despite the difficult environment last year, we never lost focus on innovation, which is the cornerstone for growth going forward," he said. "Building on a strong foundation, we will drive growth by continuing to strengthen our core business and expand beyond the core with new products and technologies that speed implementation, provide for instant consumption, and are easy accessible from anywhere, anytime and from a broad range of devices."
The Co-CEO Strategy
Did the board's decision have anything to do with the earnings report? Last year was a challenging year for most companies, but some have been more effective than others, namely SAP competitors Oracle and Microsoft, noted Charles King, principal analyst at Pund-IT.
"It's hard to find one individual who has every single skill needed to run a company. That's one of the reasons that so often you'll see successful companies with strong central CEOs surrounded by very talented executive vice presidents and C-level executives," King said.
"For a company that's as broad and diversified as SAP is or a company like Oracle, which has its fingers in an awful lot of pies, the co-CEO model can work very well. Hopefully SAP is not getting just new CEOs. Hopefully they are getting a Moses that will lead them to the promised land. If the company ends up in a ditch, the driver is usually the first person to get tossed into the weeds."