Supply Chain Matters readers may not help but notice that SAP has been quite visible of late, for many reasons. First and foremost, a change of leadership at the top resulting in a co-CEO management structure that was brought about by a rebellion of SAP customers and internal employees. In a past posting, SAP Co-CEO’s Outreach Begins- Finally A Grounding, I noted that it has become rather apparent these past months that SAP lost some perspective on its customers, instead, focusing more on SAP’s needs to continue to grow in a rather challenging and highly competitive enterprise software market, one that SAP was constantly being outflanked. Oracle has been a particular thorn in the crown. SAP’s timing on increasing software maintenance revenues did not go over well with installed base customers, particularly those residing in Europe. We have lamented on a lost momentum in enhancing supply chain management process enablement capabilities.. SAP employees are frustrated that senior management was not listening to their concerns regarding the company and their own careers.
Thus, it should be of no surprise that both CEO’s have wasted no time to try to present a more visible and proactive persona for SAP. There is also a distinct tone that the new CEO’s want to make SAP’s presence well known in their first 100 days of management, both in outreach to customers, and in the marketplace. There are of course obvious reasons, but more on that in later postings.
In the recent Q1 earnings briefings, both Bill McDermott and Jim Snabe boasted how the company was now pointed in the right direction, which included double digit growth in software and software-related services revenue in the previous quarter, to include a 10% boost in support revenues. There were statements that the market is improving, that the company was experiencing a healthy mix of both large and small deal transactions, and that average deal sizes were up. In the Q&A from analysts, it was noted that 37% of sales growth came from the Business Objects segment, which has been the target for the SAP field organization. Both CEO’s also wasted no time in appearing in multiple news outlets across the globe to announce the resurgence of SAP, and how seamless the Business Objects integration was.
Today featured the next chapter of this increased visibility, with the announcement of SAP’s intention to acquire database technology vendor Sybase Inc. for $5.8 billion, including debt assumption. That price represented a 56% premium to the May 11th closing price of Sybase stock, and roughly a four and one-half premium on current Sybase earnings. Sybase’s database technology is by no means a leader in its market segment, but does offer some interesting technology options related to leveraging in-memory technology or making information queries via mobile devices, but we have to wonder if this is all worth the premium price offered by SAP. According to The Wall Street Journal, the primary architect of the deal was Jim McDermott, who has been friends with the current Sybase CEO John Chen for some years. There are all forms of opinions percolating about this acquisition, including one from a Cowen and Company analyst who sees this as a desperate move by SAP to counter Oracle’s market traction. My initial take concurs with that of Vinnie Mirchandani on Deal Architect, namely that SAP has much work to do, and does need another large distraction with a Sybase integration. But I also will remain open-minded.
Next week, SAP will be conducting its annual ASUG and Sapphire users conference in Orlando, and Supply Chain Matters has been invited to attend. We will be providing coverage of conference events and announcements, along with impressions concerning the various SAP manufacturing, procurement and supply chain applications. We will further be on the lookout for the tone of SAP as well as the sense of direction.
Make a note to come back next week and read of our various commentaries.
Invited bloggers have been advised that this year, we will be sitting directly on the show floor, which should be very interesting. If you are planning on attending the conference in person, drop by the bloggers corral and say hello. Look for the guy with the receding hairline!
A final note- I chose the headline of this posting for a specific purpose. When I led supply chain product marketing at SAP, some of the industry and solution management executives would sometimes lament that SAP needs to make more “noise” in the market, equating “noise” to gathering attention by customers. I’m not sure whether this new phase equates to that phrase.
What’s your view?