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May 08, 2014

Comings and Goings: SAP Cloud Chief Departs and Company Realigns to Make it Rain Harder

SAP (News - Alert) has fired the head of its cloud business unit Shawn Price, as the company continues to adjust its leadership team and product mix to keep pace with dynamic market trends. In fact, according to a posting on Re/code, a series of executive changes (which includes new board members this weekend and the recent departure of senior cloud business unit leaders since the start of the year) is part of a major effort in what is a major strategic realignment.

Re/code says Price told other senior executives he would be leaving during a meeting held April 30. James Dever, an SAP spokesman, confirmed that Price had made a decision to leave: “His role was a transformational role, and we’re at a point where we’re a leading cloud player. There will no longer be a single individual cloud executive. His responsibilities will be divided among other executives.” This calls into question the Re/Code headline that he was fired.

What is not in question is that SAP, like so many other traditional ICT vendors that for years dominated their markets with premises-based solutions, are struggling as the cloud in particular—but also virtualization and mobility in general—are rapidly transforming what major customers are seeking to make their businesses more efficient, effective and agile. 

For example, as noted in my look at the business communications solutions provider Avaya’s earnings, not moving fast enough to become cloud-centric, in terms of getting not just the product fix but the business model right, has significant consequences. SAP, like Avaya (News - Alert) and a host of others, has found its legacy premises-base business disappearing faster than revenues from its cloud business have come onboard. Plus, moving to a subscription business from a perpetual license one has interesting accounting impacts that end up disappointing impatient investors who see revenue declines and even quarterly losses incurred but tend not to understand the reasoning why this is not the end of the world.

Image via Shutterstock

The realignment part of the story appears to be about SAP positioning itself as a truly cloud-centric organization. In short, a lot is riding on the success of its HANA cloud platform, which has gotten good marks from analysts and users but clearly needs to make the cloud produce heavy thunder storms and not just showers.

How fast McDermott, moves to accelerate cloud revenues and get the business model generating robust gross margins while assuring major customers not to seek alternatives will be interesting to watch. The good news is that SAP has an extensive arsenal of capabilities that hit the sweet spot for many multi-nationals in the midst of significant transformations themselves, and while SAP may have been a bit slow in its cloud offerings it has plenty of opportunity to play catch-up.

Indeed, as noted, most of the ICT major players are facing similar challenges regarding adjusting to industry trends, and ecosystems are becoming major components of creating sustainable differentiated value. SAP has a nice ecosystem foundation which is why the next few quarters are going to be something not just the financial folks will be watching but competitors, partners and customers will be closely scrutinizing as well. 

Edited by Alisen Downey

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