Residual Risk and Sustainability at SAP

In its early years, the global ERP market leader grew organically. At a time when U.S. companies were acquiring smaller, innovative companies quickly and carefully, Professor Henning Kagermann, then head of SAP, was still explaining the company's strategy of organic growth.

For a long time, SAP was different from other U.S. technology companies. SAP lived sustainability. Further growth came from the values they created and achieved. Each successful step laid the evolutionary foundation for the next success. For many years, this metamorphosis was a sign of solid IT craftsmanship. From the SAP founders to CEO Kagermann, SAP grew on its own initiative and with its own ideas. Sustainability was the hallmark of this phase.

What followed was a stormy and stressful period, filled with chaotic acquisitions and takeovers. One highlight was the acquisition of Qualtrics, a U.S. software company specializing in enterprise feedback management. From 2018 to 2023 it belonged to the German software company SAP. During the of Jim Hagemann Snabe’s and Bill McDermott’s CEO era, numerous companies were acquired; so many that the current SAP CEO, Christian Klein, is still occupied consolidating and selling the many good ideas (see Qualtrics).

The remaining risk is not the numerous acquisitions, takeovers, and divestitures, but the lack of orchestration. If something new is created from what already exists, and the metamorphosis shapes further growth, then the risk for SAP customers is minimized. SAP CEO Christian Klein, however, is planning the opposite. He is taking a high risk by chasing after general and arbitrary IT trends. His strategy does not lead to new successes, but to new sales and buzzwords that are greedily picked up by financial analysts—which is reflected in a pleasing market capitalization on the stock exchange. The SAP share price is the result of Christian Klein's current track record.

SAP customers are used to planning for many years. Spontaneous IT shows, short-term roadmaps, and short-lived trends are not the focus of SAP managers. Christian Klein's current strategy is therefore quite risky because there is hardly anyone who could intervene to correct the situation. In the past, Professor Hasso Plattner provided shock factor and course corrections. Plattner was sometimes wrong, but he was always alert enough to reposition SAP and get it back on track.

However, Christian Klein lacks any outside experience or expertise. He only knows SAP, and he is SAP. This intimate knowledge of SAP can have its advantages, but in real life it is often the mix that makes the difference. Christian Klein cannot provide that without any knowledge and experience from other companies. This particular situation poses a residual risk for SAP. Sustainability will not materialize. AI, RISE, and GROW, and employee satisfaction are the works-in-progress of a failed orchestration. SAP has no clear line when it comes to AI. Numerous partnerships are just an attempt to keep in touch with the international IT community. SAP has promised a good deal and delivered it, however, very few AI solutions are orchestrated with the needs of the SAP community in mind. AI is being integrated at SAP, but the value for SAP users is limited.

SAP's RISE and GROW offerings are still being refined and fine-tuned. Statements about what and for whom the two offerings are intended, and what is truly necessary for S/4 customizing, vary within SAP and among SAP partners.

Cloud computing is a goal of SAP CEO Christian Klein’s, but it does not add value for SAP customers. The cloud can provide additional benefits for the CIO and reduce certain risks, but it is a decision criterion in only a few cases. In the SAP community, functionality, availability, and sustainability are what count.

Christian Klein is currently suffering the biggest setback in his reorganization plans. Because he wants to give the ERP company a new direction, numerous employees are poised to leave the company under a voluntary redundancy program. What was not planned was that so many more people would want to leave. Christian Klein's current strategy thus contains a residual risk and is not sustainable in terms of the AI strategy, RISE, GROW, and Cloud.