The SAP Engine Is Sputtering

A reset after Hasso Plattner’s departure

In an in-depth report, Germany's Manager Magazin sums up the desperate situation at SAP: Professor Hasso Plattner’s departure is forcing SAP CEO Christian Klein to make a fresh start. A year ago, SAP's future seemed bright and Christian Klein had a mentor in Punit Renjen, the designated chairman of the supervisory board at the time.

However, Professor Plattner listened to his friends, colleagues, and other relationships, Plattner's designated successor was removed at the last minute. For many SAP executives and supervisory board members, an activist chairman would have been a threat to their careers. Punit Renjen would have provided a good deal of oversight and even more advice. He would have been an excellent chairman of the SAP Supervisory Board, as Professor Hasso Plattner emphasized several times, a year ago.

A slowpoke with a reset

Punit Renjen will step down from the Supervisory Board at the SAP Annual General Meeting next May. There is a new successor to Plattner, but no one need remember his name. He will only hold his position for two years and is already a member of the SAP Supervisory Board. He is part of the old guard that fears nothing more than change.

Plattner's soon-to-be successor and chairman of the SAP supervisory board is a lame duck, leaving SAP CEO Christian Klein free to do as he pleases. Klein is using this unique selling point for a reset, as the German Manager Magazin explains in detail. It is pure desperation. Every PC user knows the situation: when nothing works anymore and nothing helps, then there is a reboot.

After ten years, S/4 is going through puberty

SAP S/4 is now ten years old and still has not been adopted by SAP customers. S/4 was born as the on-prem successor to Business Suite 7, and with “lift and shift”, S/4 was meant to become a cloud system, which it still isn't.

The SAP user association DSAG asked about the ERP solutions used, and in 2024, the Business Suite 7 is still clearly in the lead with 68 percent, ahead of S/4 on-prem with 44 percent, plus 11 percent for S/4 Private Cloud, which is ultimately also an on-prem model, and only 6 percent use S/4 Public Cloud, which SAP CEO Klein so fervently promotes. Multiple answers were possible, and many SAP customers often use several SAP systems in parallel. Simple Finance as an S/4 derivative is very popular and widely used, while many continue to rely on Business Suite 7 for logistics, SCM, HR and CRM.

"The cloud operating models for S/4 Hana still play a subordinate role. This is not surprising, as companies face many challenges when moving to the cloud. Strategic reasons such as existing investments and security concerns for critical IT infrastructures certainly play a role," explains DSAG Chairman Jens Hungershausen. The DSAG members surveyed are critical of SAP's S/4 Cloud strategy. Only 13 percent of respondents had a positive opinion, while almost half had a negative opinion. In short, Christian Klein's cloud strategy has failed miserably.

Reset in the AI construction site

When the DSAG (German-speaking SAP User Group) asked its members how they rated SAP's AI strategy, almost half of the respondents did not answer. 21 percent said it was satisfactory, and 10 percent said it was good. "Our members are particularly critical of the coupling of AI and the cloud," explains Jens Hungershausen. DSAG members want easier access to AI and more transparency regarding existing and future possibilities. In particular, they want practical use cases and open integration that also works in on-prem installations.

Despite all the criticism of SAP, more than half of those surveyed believe that the software maker will remain relevant to their companies in the future. "One of the reasons for this is certainly the fact that the software manufacturer has made great inroads into companies' system landscapes over the past few decades. Replacing existing SAP systems is difficult to conceive for many companies, simply because of the effort involved," concludes DSAG chairman Jens Hungershausen. However, the industry association sees considerable potential for SAP to support companies in their transformation projects.

Transformation vs. reset

SAP must decide whether it will use a cold start or a warm start to start its engines, and by this, I mean for its technical reset. The German magazine Manager Magazin leaves this important question unanswered in its April 2024 cover story, and SAP CEO Christian Klein cleverly avoids all questions. He always answers with the same buzzwords: cloud and AI. However, Manager Magazin does not hold that against him. The DSAG (German-speaking SAP User Group) members and the entire SAP community have a completely different opinion.

For SAP CEO Christian Klein, transformation, consolidation, and orchestration have been a failure. With the departure of Professor Hasso Plattner and the removal of Punit Renjen as chairman of the supervisory board, Klein has lost all possible mentors. His own Executive Board is too heterogeneous and inexperienced to support the CEO—everyone is busy around the clock. Alone at home, Christian Klein hits the reset button.

The cuckoo's egg on the SAP Executive Board

Professor Hasso Plattner could have had a satisfying last year as chairman of SAP's Supervisory Board. Punit Renjen, who was elected to the SAP Supervisory Board a year ago and was then designated as Plattner's successor, would have been an activist Chairman and would have broken the "never change a running system" rule and created a new SAP. This SAP would have focused first and foremost on its own customers. No stone would have been left unturned; it would have been a reorganization on an unprecedented scale.

Instead, Professor Plattner is handing over a well-positioned and consolidated company to his designated successor, Pekka Ala-Pietilä. CEO Christian Klein is leading the company conscientiously and diligently. But there is a young cuckoo's egg on the future SAP Executive Board! 

Last year, Renjen conscientiously analyzed an SAP whose Supervisory Board he was to chair. He found many areas in need of improvement, including the SAP Executive Board. It was Punit Renjen who, from behind the scenes, initiated the reorganization at the turn of the year 2023/2024 that gave Thomas Saueressig a new, important position on the Executive Board. At the same time, Muhammad Alam will join SAP's Executive Board as Saueressig's successor, effective April 1. Muhammad Alam is the cuckoo's egg of former SAP Supervisory Board member Punit Renjen.