Throughout the tech industry crash and subsequent resurgence in Silicon Valley, German software maker SAP was one of the lucky ones. Under the leadership of Shai Agassi, the company's San Francisco Bay Area outpost became a locus for local computer science talent and forged alliances with some of the region's most influential companies.
Now, little more than two months after Agassi's sudden departure, SAP is trying to show employees, industry partners, and startups that it still has West Coast mojo.
At a June 7 press conference at SAP's Palo Alto, Calif. campus, Chief Executive Henning Kagermann, Deputy CEO Léo Apotheker, and other top officers said the company can still hold sway in America's tech innovation hub, even in the absence of its onetime star.
"You have to have a development presence in the largest economy in the world," Kagermann says. He spoke in an interview in the back of a black Ford SUV ferrying him from SAP's offices to a speech at the Computer History Museum in Mountain View, Calif., where SAP made a US$250,000 donation.
Earlier in the day, Kagermann announced what SAP calls a co-innovation lab in Palo Alto, where it will work with local heavyweights Hewlett-Packard, Intel, and Cisco Systems on a new breed of software that weaves together features from various vendors and is tailor-made to meet a customer's specific needs. It's referred to in industry parlance as component-based software, and it's critical to SAP's future.
Without the visionary
As his driver plied the Valley's streets, Kagermann underlined the area's importance. "Whatever happens in Asia, [Silicon Valley] is still the place most innovation is happening," he says.
The States are also SAP's fastest-growing market. First-quarter sales of the company's software for managing accounting, inventory, orders, and manufacturing schedules rose 15 percent in the region that includes the United States and Canada, measured in constant currency. That fueled a 9 percent overall revenue increase and a 10 percent rise in earnings, to US$421.6 million, and halted a series of bad quarters. Second-quarter U.S. sales are "on track", Kagermann says without elaborating.
Now the question is whether SAP can attract top talent, keep close ties to its Bay Area neighbors, and undertake an ambitious reworking of its software code without Agassi, whose technical knowhow, business acumen, and charisma helped SAP find a balance between a deliberative German corporate headquarters and the Valley's nimbler culture. Palo Alto-based Agassi, who headed product development and was considered a candidate for CEO, left on Apr. 1 to start a new venture in electric vehicles after facing a five-year wait to contend for the top job.
The change leaves Apotheker, who was head of sales, next in line. It didn't take long for Agassi's departure to cause ripples within SAP's ranks. At the end of June, Aliza Peleg, managing director of SAP Labs in Silicon Valley and a longtime Agassi associate, will leave the company, a spokesman said.
New guard steps forward
"Shai was clearly the glue between the U.S. and Germany," says Brent Thill, director of software research at Citi. Thill is quick to voice his confidence in the software maker's ability to forge ahead. "The bench is fairly deep," he says. "They're going to try to not miss a beat."
On hand for the new lab's opening were two Palo Alto execs SAP has elevated since Agassi left. Doug Merritt, a fast-rising star who's made the rounds of Valley companies including Oracle and PeopleSoft, was promoted in March to take charge of a key software project with Microsoft and lead development of SAP's regulatory compliance and mobile-phone and search products.
In April, the company named Vishal Sikka, who holds a computer science PhD from Stanford University, as chief technology officer. Merritt, recruited by Agassi to SAP two years ago, admits the departure is a loss. "When your visionary leader leaves, what the heck is that going to do?" he says. But he adds that others could step in to fill the breach. "It's sad to lose [Agassi], but he's just one person."
SAP's new guard will need to get up to speed quickly. The company faces competition from Oracle, which is gaining share through a series of acquisitions in the US$56 billion-a-year market for enterprise resource planning software.
On June 1, Oracle filed an amended complaint against SAP in a federal district court in San Francisco reiterating charges that SAP employees stole Oracle software and support documents. Apotheker said at the press conference that SAP planned to "vigorously" fight the claim. "Our customers know we have a long-standing history of protecting intellectual property," he said.
Modular-software mission
Meanwhile, new threats have emerged from Bay Area companies like sales management software maker Salesforce.com, and Workday, an HR software startup led by PeopleSoft founder David Duffield. To counter the rise of online software and fend off Oracle, SAP will spend as much as US$520 million to launch next year two low-priced software products, called A1S and A1N, aimed at small and midsize companies.
They're supposed to bring in US$1.3 billion in revenue by 2010, and their
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