Co-founder and SAP supervisory board member Hasso Plattner requested at last year’s general meeting that SAP CEO Bill McDermott’s salary should always be reported on accurately. In 2017, Bill McDermott earned around 10 million Euro, and he gained a little more then 11 million because of stock options.
Consequently, Bill McDermott ranks among the best earning DAX CEOs. Hasso Plattner defended the high stock option by saying that only the high overall stock price made such a high payout possible, and that a high overall stock price was good for any shareholder.
That way, a discussion about the salary of SAP’s CEO could be avoided, and Bill McDermott was free to announce his vision of tripling SAP’s stock price.
Maybe McDermott likes to measure his success in SAP’s stock price because the U.S. business world is overwhelmingly focused on the stock market. At Sapphire 2018, he could still rejoice. However, looking at the performance of the stock price in 2018 now, he might not feel so excited anymore.
SAP’s stock price in 2018 ended up where it started: at roughly 90 Euro per share. This is miles away from its temporary high of 108 Euro. “I am convinced that the best times are still ahead of us”, Bill McDermott emphasized in an interview with German magazine “Manager”.
If SAP’s stock market deep dive is because of an overall economic slowdown or because Bill McDermott acquired the American family business Qualtrics for 8 billion U.S. dollar is subject to speculation.
The infamous Qualtrics acquisition
In fall of 2018, the companies announced that SAP would acquire Qualtrics, a pioneer in Experience Management (XM) software. Qualtrics’ XM platform collects feedback and data concerning customers, employees, products, and brand. These four factors are becoming increasingly important and will soon be crucial for business success.
Bill McDermott is convinced that Qualtrics will be essential in his CRM battle against Salesforce. That’s why he acquired the company shortly before it was about to go public. Financial experts estimate that Qualtrics would have been worth 5 billion dollar at New York Stock Exchange. SAP accepted a massively higher price, as Bill McDermott believes that this investment will ultimately pay off.
“We continually seek out transformational opportunities – this announcement is exactly that. Together, SAP and Qualtrics represent a new paradigm, similar to market-making shifts in personal operating systems, smart devices and social networks”, Bill McDermott said about the acquisition. “SAP already touches 77 percent of the world’s transactions. When you combine our operational data with Qualtrics’ experience data, we will accelerate the XM category with an end-to-end solution with immediate global scale. For Qualtrics, this introduces a dynamic new partner with the belief, passion and scale to bring experience management to millions of customers around the world.”
Bill McDermott evidently does not care about technological, organizational, or licensing challenges this will bring. Here, the “empathy” of the genius salesman shines through. He wants to convince customers with a perfect CRM system – like Xerox did with its technological advances, or like SAP turned R/3 into its unique selling point.
However, times have changed. SAP now offers no product that does not have competitors in the market – quite on the contrary, actually. While the unique selling point ERP still exists, in every other area, like CRM, logistics, IoT, cloud, and analytics, SAP has to compete against strong companies. Even Qualtrics doesn’t have a unique selling point!
However, Bill McDermott disagrees. “The combination of Qualtrics and SAP reaffirms experience management as the groundbreaking new frontier for the technology industry”, he says. “SAP and Qualtrics are seizing this opportunity as like-minded innovators, united in mission, strategy and culture. We share the belief that every human voice holds value, every experience matters and that the best-run businesses can make the world run better. We can’t wait to stand beside Ryan and his amazing colleagues for the next chapters in the experience management story. The best for Qualtrics and SAP is yet to come!”
In light of these developments, it’s reasonable to ask whether Bill McDermott has noticed the cultural change in the business world. No company was able to compete with SAP’s R/3, but most of them didn’t have to: R/3’s complexity was a gold mine for hardware and software providers. IBM, HP, Oracle, Microsoft, Fujitsu, and many more IT companies and consultancies made good money off of customizing and operating R/3.
This market situation has fundamentally changed, however. Friends have turned into competitors; for example, SAP is pitching its database Hana against IBM DB2, Oracle, and Microsoft’s SQL server. The once favored hardware provider HP now has to compete with numerous companies because SAP is very generous in giving out certificates for Hana hardware. Not surprising, as it is an additional source of revenue for SAP.
In addition to this complex mesh of providers, consultants, and users, cloud hyper scalers are flooding the market. Consequently, Bill McDermott is forced to accept new kinds of partnerships.