Share prices for German software giant SAP have been punished by investors over the last year. For CEO Bill McDermott, who lives in Villanova, it has been a trying experience. But, he says, he’s leading the most important transition SAP can be making right now. “That takes courage,” he said.
SAP has blamed its sagging performance on this seismic transition: no longer are most of SAP’s customers buying bundled software to install locally, but rather they are subscribing to cloud-based software options — like SAP’s signature and much hyped HANA platform.
That means less revenue upfront and, the plan goes, more later. But that move to the cloud is exactly the kind of bold change that McDermott said he wants to be known for, as he recently told Fortune magazine.
“You can’t build a company for 60 days; build for 60 years,” said McDermott, 52, tall and fit with full, graying hair. McDermott, who became the company’s first sole American CEO this spring, was speaking last week as the keynote of the IMPACT conference from PACT, being interviewed by, full disclosure, me.
SAP is forgoing short-term value for long-term impact, he told the audience, referencing a recent $8.3 billion purchase of cloud-based business travel expense company Concur, among other moves. McDermott has positioned himself as the leader of a big, established brand (SAP was founded in 1972) that’s hoping to outlast its primary rival, Oracle, by taking pain now for future gains — something McDermott says in the business press with some regularity.
McDermott is now promoting his new autobiography, Winners Dream, which doubles as something of a business philosophy book.
Written with former Forbes writer Joanne Gordon, the book has three broad sections: his middle class upbringing on New York’s Long Island; his Xerox career, from entry level to CEO; and his executive growth at SAP.
It’s straightforward, rich with the optimism you might expect from a lifetime corporate sales guy and dotted with anecdotes that are ready-made fables for American capitalism. Picture teenage McDermott buying the corner deli he worked in, or him refusing to leave the Xerox offices until he got his first job there, or him building his own executive team at SAP through thoughtful conversations.
McDermott is practiced at being warm.
Before last week’s on-stage interview, he received this reporter with a cocktail and made a point to talk thoughtfully with a young entrepreneur who approached. But a man charged with shareholder interest and responsible for more than 68,000 employees in 130 locations can’t be all things to all people.
When asked onstage about the role he might have in growing the Philadelphia technology community, as a Main Line resident and CEO of one of the world’s largest software companies, he offered an honest answer, but likely one that could play the same way in Peoria. He loves the place, he said. Entrepreneurs should build on the HANA platform. SAP will need to purchase talent and technology. It’s a large employer that hires locally. Look at our partnership with Drexel. But there was no sweeping or certain gesture there, just practiced warmth.
Because the reality is that McDermott is running an $80 billion company headquartered in Germany in the midst of a protracted battle with other enterprise software giants.
Now, too, he says, he has to educate investors on the long-term play SAP is making by moving its customers to cloud offerings.
It’s building for the future, just like McDermott did when he was growing his deli business or climbing the corporate ladder. It’s about focus and priorities.
“You have to be a warrior,” he said.
(Find the questions this reporter asked McDermott at IMPACT here.)
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