At the end of January, SAP held their annual press conference, and one thing became abundantly clear: not only does SAP have problems, but the company is reacting erratically to said problems. SAP CEO Christian Klein announced the layoff of 3,000 employees from the CRM area, among others, while at the same time employing around 1,000 temporary workers from an Indian IT service provider for development and maintenance, including technical support for the discontinued program, Business ByDesign.
At the end of last year, I attended the CIO conference in Switzerland, where I spoke with numerous heads of IT and heard a good deal of praise towards the current SAP CRM, which is now supposedly much better and more powerful than Salesforce’s. It then came to me as quite a surprise when I heard Christian Klein’s words at the SAP press conference: SAP would be laying off their CRM personnel and would sell the CRM add-on product Qualtrics. It seems like SAP is surrendering to Salesforce just when customers are beginning to show interest again.
Christian Klein and the young SAP Executive Board, with Juergen Mueller and Thomas Saueressig, lack long-term experience and perspective, which has in turn led SAP to become erratic. But ERP does not work that way. Many years ago, the then CFO of the world’s largest chemical company, BASF, stated that the introduction of SAP R/3 took over a decade to complete. Once a company makes a decision regarding ERP, that decision has far-reaching ramifications. It can take years to rectify a mistake.
Many of Christian Klein’s orders seem reckless. But the SAP CEO is in good company it seems, as a report from the German magazine Spiegel from the end of January demonstrates:
“According to this report, Mercedes, Audi, and Volkswagen urgently need to push ahead with their technical innovations in order to not lose their global market shares in the electric age. […] But it may already be too late. Hildegard Wortmann, a member of Audi’s board of management and responsible for sales and marketing, reiterated just how dramatic the situation is for German car manufacturers a few weeks ago. According to Wortmann, there is only a 50 percent chance that Audi will still be around in ten years. The challenges the auto industry is facing are so great, she said, that even swifter changes are needed: ‘Otherwise we’ll be left behind.'”
I drive an Audi A3 that is well over ten years old. I bought the car with the most expensive sound, radio, and navigation system available at the time, including an Apple iPod interface. A few years later, I discovered that the iPod interface could not be updated. While at the time every Miele washing machine, every Samsung TV, and every smartphone could already update its firmware via USB or other interfaces, Audi informed me my car radio display would continue to show iPod music tracks only as a numerical code. Even my significant other’s Mercedes SLK was capable of showing plain text. I now maintain that Audi has always had an erratic relationship with electronics, and the origin of all of its current problems dates back more than a decade. Likewise, it will take another decade for any improvements to occur—although there is only a 50 percent chance that Audi will still be around by then.
With SAP, the current situation is similar. In a steadily growing healthcare market, SAP has decided their industry solution healthcare (IS-H) should not be expanded and rolled out worldwide, but instead discontinued. At the Hasso Plattner Institute in Potsdam, Germany (founded by Hasso Plattner, one of the original SAP founders), there is a university major called Digital Health, which shows that some SAP-adjacent institutions recognize that the digitization of healthcare is, and will continue to be, a relevant topic. Similarly, SAP will not be bringing the innovative Business ByDesign program back to life as an open-source product in line with the current Zeitgeist, but instead discontinuing and outsourcing it. SAP will not be harmonizing and synchronizing their CRM and Qualtrics, but instead reducing and selling them. The only thing left to do is adapt. But it may already be too late.
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