SAP's McDermott rolls with ever-changing tech 'revolution'

Co-chief executive Bill McDermott at SAP'S Newtown Square headquarters. "The consumer has put the corporate world on its head," he says.
Co-chief executive Bill McDermott at SAP'S Newtown Square headquarters. "The consumer has put the corporate world on its head," he says. (MICHAEL S. WIRTZ / Staff Photographer)
Posted: December 05, 2012

Quickly, name some tech companies that have changed your life lately.

Apple. Google. Maybe Amazon.

Bill McDermott in Newtown Square, co-chief executive officer of software giant SAP AG, wants his company on that short list.

Multinational SAP, of Germany, which boasts 61,000 workers, $20 billion in yearly sales, and a stock market value approaching $100 billion, has worked behind the scenes since the 1970s, building "enterprise" software that collects and connects financial and customer data.

SAP helps companies track sales, costs and shipping expenses for Wawa hoagies, Union Pacific freight cargoes, DuPont biofuels, Heineken bottling and thousands more products and services for giant multinationals.

But, for all their Fortune 500 clients, the big business systems built by SAP and competitors led by Oracle Inc. are in danger of being bypassed. Google and Amazon have built networks of public servers for use in cheap "cloud computing" data and communications. Smartphones and tablets put computer power in consumers' and workers' hands. Firms such as Salesforce.com use these tools to build specialized lower-priced software. In fast-growing countries such as South Africa and Bangladesh, companies now reach customers directly through smartphones.

"The consumer has put the corporate world on its head," McDermott, 51, said in an interview in his modest office (carved Nativity set from India, pictures of his wife, sons, late parents, and NFL team owners, a door opening to the green-roof garden) atop SAP's curved steel-and-glass U.S. headquarters, which bulges with 2,400 engineers, salespeople and managers, up from 1,000 a decade ago.

"Companies that recognize the revolution is on are the companies that have a chance to win in this new era" by focusing on clients' individual users, he said. "If we fall behind on these investments, we are going to get run over."

McDermott, who earned $6.6 million from the company last year, is admitting what investors know. SAP share values fell from around $60 in the mid-2000s to half that in 2008-09. Two years ago, SAP founder and chairman Hasso Plattner ousted CEO Leo Apotheker and promoted McDermott, then head of field operations, and German engineer Jim Hagemann Snabe, as co-CEOs with a mission to add and sell products for everyday users. "Think small," as McDermott put it in a presentation to the yearly World Economic Forum in Davos, Switzerland.

They set high targets and spent a total of $13 billion buying database processor Sybase Inc., cloud computing workforce software maker SuccessFactors Inc., and business market-maker Ariba Inc., adding mobile services and applications to help customers share with their people in the field. Shares closed at $80.13 Tuesday.

SAP shows "strong momentum" selling new products to the biggest companies, "but we still question whether the broad customer base and more volume-based deal flow will follow suit," J. Derrick Wood, stock analyst for Bala Cynwyd securities-trading giant Susquehanna International Group, wrote in a report to clients Nov. 16. SAP hiring, which grew rapidly in 2011 and early 2012, has lately flattened.

Tool and toy. After his promotion two years ago, McDermott ordered 4,000 Apple iPads. Apple founder Steve Jobs called him. "Bill," he asked, according to McDermott, "what are you doing?"

McDermott told how SAP had tested an iPad to see how its then-business partner Sybase's data systems, linked to SAP software, looked on the new tablets. He was enchanted by the quick, clear images. He told Jobs he wanted all SAP salespeople to have one.

Jobs knew McDermott from McDermott's pre-SAP stint at California's Siebel CRM Systems (now part of Oracle). The two talked often about pancreatic cancer, which was killing both McDermott's mother and Jobs.

Jobs warned McDermott about the limits of the iPad. How it "didn't print," for example. "We don't care," said McDermott. "It looks gorgeous. I have to get these."

Jobs "said right there, 'Aha,' " McDermott recalled. SAP had shown that iPad was a business tool, not just a toy.

McDermott hung up and made a second call, to John Chen, boss of Sybase. "I said, 'John, sometimes dating is the right way to go, and sometimes you gotta get married. We are at one of those moments, my friend.' " Chen sold.

The direct-to-user approach mirrors consumers' use of smartphone technology, says SAP user Anthony Bosco Jr., chief information officer at Day & Zimmerman, the Philadelphia engineering, construction and military contractor. Technology used to be "done with papers and faxes, and you had systems like SAP to consolidate it," Bosco said.

But now, "we're using tablet computers and smartphones to track it all in real time. So we're using SAP's Sybase products to manage our mobile devices, we're using SAP Analytics to create dashboard screens so our managers are informed of what's going on as it happens, and two weeks ago we just rolled out SAP's Afaria mobile device management," he said.

When SAP just made enterprise software, "maybe 15" of Day & Zimmerman's 25,000 worldwide staff members used its products directly. Now "it's half," Bosco said.

Score. SAP is also going mainstream through pro sports leagues, including the National Basketball Association, which says SAP will run its new smartphone data system. The league plans to start the service through NBA.com during the February All-Star break.

"We have a solution geared to the fan experience," said McDermott, whose late grandfather, Robert, is in the Basketball Hall of Fame (for the Original Celtics, and the Chicago American Gears), and whose father made him assistant coach of the St. Martin of Tours team in his native Long Island, teaching teamwork, when he was still in elementary school.

"Here's how it'll work: The fan comes to the gate. The ticket gets coded in. The system analyzes their data" and scans Facebook and other data sources. "It knows their favorite player. They get a message: 50 percent off Kobe's jersey! A special message from Kobe: Thanks for participating in the game! The Lakers are down, he comes to the line: Here's his foul-shooting percentage! You can play what-if scenarios on your device, and participate in new, creative ways. When you leave you get an audio message from your favorite player: 'I'm glad you love the L.A. Lakers.'"

McDermott ran a deli in Amityville, N.Y., to put himself through Dowling College, and talked his way into a sales job at Xerox. He was a champion salesman and, at 24, a sales manager in Manhattan.

Greg McStravick, who as a then-recent Villanova grad reported to McDermott in the late 1980s, recalls a December joint sales call on a big pension manager, Segal Co. As McStravick puzzled how to delay the deal a month so it would meet his next year's quota, McDermott ordered, " 'Stop the cab. Get out.' " That meant a half-hour's walk. McDermott ordered McStravick to take his glove off. " 'Swing your hand.' "

When they met the client, "our cheeks are red. They shake our hands; they say, 'You're freezing. You must have busted your tails to get here.' Bill looks at me. He winks."

To McStravick's surprise, they clinch the sale. Unprepared, he admits he doesn't have the paperwork. "So Bill tells them, 'This is what I love about Greg. He never assumes too much. Thanks for your business. Greg will be back in an hour with the forms.' We get in the elevator. He puts his hand on my arm and says, 'Don't ever do that again.' "

On the way back, McDermott pushed McStravick into a BMW dealership. "He tells the dealer I'll be back, next day, to pay for the car. He gets me in the car to smell the leather. He said, 'I want you in debt, Greg, that makes you more motivated." McStravick bought the car. Later he followed McDermott to SAP, where McStravick now heads the East Coast sales team.

The best salesmen have "the courage to ask for the order," McDermott says. Winning salespeople avoid "loser talk." They come in early, and avoid long lunches or buying themselves treats to cope with rejection. Just make more calls, he says.

McDermott is smooth - for real, insists Anne Mulcahy, a former Xerox chief executive and McDermott's ex-boss. "He's so much more than a salesman's salesman. He rolls up his sleeve and engages. He leads by example. I don't just mean he's charismatic. I mean he sees problems and simultaneously he sees the solutions."

And he knows how to use the ax. When he first joined SAP as a manager in 2002, after the company burned through five CEOs in five years and even veteran engineers were turning cynical, McDermott replaced a dozen of the 14 who reported to him. In public meetings, he demanded they stop leaving early on summer afternoons - and stop sneering.

"I told them, 'You guys are underperforming. I came here to win. What it took you 10 or 15 years to do, we will do in the next two years.' A lot of people said, 'This is way too much.' "

How can he and Snabe share power? "The first thing we have is trust. At first we probably saw more of each other than our spouses. Now we're comfortable in our roles. Two is better than one."

He said SAP is fortunate that founder Plattner heads an independent board that "can take an objective view of what management is doing," with German-style worker representation: "The voice of the people, in the board room? It helps you make smart decisions."


Contact Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com or @PhillyJoeD on Twitter.

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