SAP AG's founder Hasso Plattner said the largest business-software maker's programs remain too cumbersome to impress a generation of users weaned on slick apps made by Google Inc. and Facebook Inc.
To help attract the talent SAP needs to keep pace with users' expectations, Plattner today opened a development center outside Berlin to incubate technology and foster young programmers. The “Innovation Center” sits on a Potsdam lakeside 9 kilometers (5.6 miles) from the research institute that bears the SAP chairman's name.
SAP plans to make the site a key development hub and will potentially double its staff to 150 to work closely with technology startups, said a person familiar with the matter, who asked not to be named because the plan isn't public.
“The biggest weakness of SAP worldwide is the user interaction,” said the 70-year-old, who was joined by other top SAP executives. “We don't want to leave anyone behind, but we have to move this franchise forward.”
The company Plattner co-founded 42 years ago is undertaking a tricky transition from programs for managing supply chains and financial systems installed on customers' computer servers to newer cloud-computing applications delivered over the Internet. Hand in hand with the change is a database called Hana and new user interface that offer customers faster response times and a more Web-like look.
“SAP has to be closer to the 150,000 students in Potsdam and Berlin,” Plattner said, wearing a purple sweater and addressing a room full of staff, customers and journalists. “Not everyone wants to come to Walldorf.”
Plattner was referring to SAP's headquarters more than 400 kilometers southwest of Berlin. “We have to retrain 20,000 developers inside SAP.”
To be sure, re-making the business software to attract new customers isn't as simple as opening a shiny development center near the German capital, a point Plattner underscored when he swatted away questions about other parts of the world rivaling California's Silicon Valley.
The shift to cloud computing is also hurting profit. SAP has already pushed back its goal of reaching an operating margin by two years to 2017 because rented Web software costs less upfront than the programs it traditionally offered.
The company's revenue may reach 19.1 billion euros ($26 billion) in 2015, according analysts' estimates compiled by Bloomberg. The company had forecast 20 billion euros in sales for that year.
Late Cloud
“SAP is thinking more optimistically about growth of its core than we are,” Rick Sherlund, a Nomura Securities analyst who recommends buying SAP shares, said in a Feb. 4 note. “SAP is late to the cloud.”
To bridge the gap, the company is pouring effort into a simpler user interface and developing products SAP can continually update online.
“Those two things have been traditionally difficult for SAP, but we have been putting a lot of energy into that recently,” Vishal Sikka, SAP's chief technology officer and a board member, said in a recent interview.
At the two-day event where Sikka also spoke, SAP is showcasing how its software can be applied to new areas — such as personalized medicine and sports statistics analysis — that can help with the transition.
Co-Chief Executive Officer Bill McDermott also appeared, saying that by 2025, more than 70 percent of workers would belong to the “millennial” generation born after the early 1980s.
The data-crunching Hana software — an acronym for high- performance analytic appliance — rapidly processes millions of database records ranging from business data to genome sequences found in cancer patients' blood. The vast quantity of information amassed by businesses, governments and universities that requires powerful computers for storage and analysis is often referred to as big data.
SAP's chairman, with a fortune of $10.6 billion according to the Bloomberg Billionaires Index, has had a long-running professional feud with Oracle Corp. CEO Larry Ellison. Plattner incubated Hana, which competes with Oracle, using a small group of developers near Berlin. Sales of Hana grew 61 percent last year to 633 million euros ($864 million), and are a bright spot amid slower growth for traditional software.
The shares were little changed at 57.18 euros at 3:03 p.m. in Frankfurt, valuing the company at 70.3 billion euros.
McDermott, an American who will take over as sole CEO in May, told investors in New York last week that SAP is dedicating more salespeople to online software.
Plattner, who is SAP's biggest shareholder with a 10 percent stake, also plans to address how the new center in Potsdam can work more closely with the Hasso-Plattner Institute, an academic research body he has personally endowed.
Bloomberg News
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