"Embrace" cloud trends

At the beginning of February, "Der Aktionär" published a blog entry with the title "SAP restructuring: Can the share finally follow the cloud trend? Rarely have there been so many messages in one line!

SAP has positioned itself badly and incorrectly in recent years: An ERP unique selling proposition has turned into a general store that ponderously chases after every IT trend.

Together with ex-SAP CEO Professor Henning Kagermann, they would have had the chance to almost completely capture the IoT and Industry 4.0 revolution. Today, they have to share the field with a large number of potent competitors. The ERP group has carelessly squandered a second unique selling point.

The "SAP restructuring" refers only on the surface to some 4,000 employees from whom the Group wants to part. The real problems lie deeper: CFO Luka Mucic cautiously and very cautiously hinted at the annual press conference in January of this year that it is not only the wrongly positioned employees who are causing the Group to be in a bad way.

Bill McDermott and he plan to break up or merge locations. The ERP world leader is hopelessly fragmented and atomized. Indiscriminate acquisitions and the belief that the cloud will cure everything have led to a corporate conglomerate and an unmanageable infrastructure that even the best CEO can no longer oversee and control.

From SAP National Security Services (SAP NS2) to Sybase to Qualtrics, SAP's empire stretches and given the companies, locations and issues, SAP's board appears very lean.

If things are getting out of hand here, it is only logical and not surprising. And Bill McDermott is still bringing new topics into play: At his annual press conference this year, he expanded the SAP Leonardo toolbox for digital transformation to include the topic of quantum computing!

There are two exit strategies at SAP from the organizational and return disaster, both of which are, strictly speaking, a defeat for Bill McDermott: He is restructuring the SAP universe in terms of employees and locations together with his CFO Luka Mucic, and he is transferring his "Cloud First" strategy to the hyperscalers and SAP partners, who are currently indicating the cloud trend and are very successful. At SAP Fkom 2019, "Embrace" was born: SAP wants to embrace and embrace the hyperscalers and SAP cloud partners.

McDermott is once again trying to square the circle: In the meantime, he wants to say goodbye to 4,400 employees by means of a "golden parachute" and still have over 100,000 employees in one year (currently about 95,000).

At the same time, his CFO Mucic has announced that company locations will be consolidated and merged. The product portfolio will probably also be restructured - but SAP doesn't like to talk about that:

SAP's existing customers have often invested many resources in customizing and further developing SAP products. But if, from SAP's point of view, the return on these products is not right, the product is discontinued very quickly and without consideration - the user has no replacement and is left with nothing.

"Embrace" - embrace - not only applied at the field kick-off meeting (Fkom 2019) in Las Vegas and Barcelona, but is said to be SAP's new partner program to save the Bill McDermott's cloud story.

There is no doubt that the "cloud first" strategy has failed: SAP lacks resources and know-how and the scaling effect is low. The existing customer expects not only a functioning data center network from SAP, but also consulting services and cloud knowledge.

This is because SAP's cloud prices are much higher - compared to the hyperscalers. But because this is not the case, Microsoft with Azure is currently considered the star in the SAP cloud community. "If you can't beat them, join them," Bill McDermott may have thought, and issued the motto "Embrace" for Fkom.

"Der Aktionär" puts it in a nutshell on its web portal:

"It has been around four years since SAP announced the last major restructuring, and now the next restructuring is on the agenda. The goal is to reduce debt, simplify business processes and focus on the cloud. This finally promises a positive margin trend again for the software group - an upward trend in the share price could follow."