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So far, SAP's cloud business is not very profitable - and it will probably remain that way. [shutterstock: 565538908, Rrraum]
[shutterstock: 565538908, Rrraum]
Blog Last and Least

No Cash-In For Bill McDermott

SAP CEO Bill McDermott has spent a lot of money on cloud, but not much has come back yet. Cash flowing out - but no cash coming in! SAP has no chance against hyper scalers - and they are not doing so great either.

Bill McDermott has gotten quite defensive this year. It’s about more than cloud computing now. SAP’s stock price is decreasing, and the cloud margin is unbelievably low. The overall condition of the leading ERP company is uncertain at best.

Because of that, SAP CEO Bill McDermott and CFO Luka Mucic are trying to save whatever they can by laying off some 4,000 employees. As kind of a farewell package, they offer them golden parachutes – which will cost a lot of money.

Could it be any worse?

SAP has spent a lot of money to finance its “Cloud First” strategy. Millions of dollars were spent to create an attractive cloud business. And while SAP’s cloud business is actually generating revenue, this does not reflect in its stock price. Financial analysts are still doubtful, and shareholders are unsatisfied.

Countless cloud investments have confused SAP customers more than they have motivated them to pay for new licenses. HR/HCM systems in the cloud with SuccessFactors and Fieldglass are not enough to convince customers. Ariba, SAP’s e-commerce platform, is generating a lot more revenue than Amazon, but is not contributing to the overall margin whatsoever. Ariba is not promising customers any real value.

Real value is something that customers often search for in SAP’s cloud computing but are rarely able to find it.

Some users have turned down “cheaper” offers from AWS, MS Azure, and Google and opted for the more expensive HEC (Hana Enterprise Cloud). That’s because SAP customers thought higher prices would mean higher cloud know-how. What a lapse in judgement! HEC projects had to be cancelled because SAP just lacks the resources, the staff, and the know-how for a successful cloud implementation.

Genius salesman, bad CEO

Others are now opting for local cloud providers that still have some SAP know-how left, or they are making the move towards MS Azure. Microsoft has been working with SAP customers for many years now, knows about ERP’s complexity, and has experience and know-how.

Bill McDermott might be a genius salesman, but he sure is a money-wasting CEO with ambiguous ambitions. His strategies are misguided, to say the least.

Will the new SAP CRM suite, which is currently still just Hybris software with the innovative name C/4, be able to compete with Salesforce? Will Bill McDermott be able to let each and every customer with AnyDB installations migrate to Hana?

We don’t know yet. But it is safe to assume that he will again waste a lot of money by fixing previous mistakes. The SAP community needs a real roadmap and trust in a joint future, but if Bill McDermott will be able to deliver that remains to be seen.

Source:
E-3 Magazine March 2019 (German)

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E-3 Magazine

Articles published through E-3 Magazine International. This includes press releases by our partners as well as articles and reports from the E-3 team of journalists.

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