A leaked email from Lars Dalgaard, head of SAP's Cloud efforts, reveals that the vendor will create a dedicated team to take out Salesforce.com.
So with SuccessFactors under its belt, Business ByDesign quietly re-defined and now a $4.3 billion bid now in play for Ariba, what’s the SAP game plan for its Cloud ambitions? It’s all the remit of Lars Dalgaard, the former SuccessFactors CEO and now head of all SAP’s Cloud efforts.
Last week he gave some idea of the broad plan of action at the Sapphire conference in Orlando, but a more detailed glimpse into his plans has emerged this week courtesy of a leaked email that’s been given a public airing by tech blogger Michael Kroker
Sent on 15th May, the email is entitled Accelerating our Cloud Business and was sent by Dalgaard to SAP staff as both a rallying cry and a warts and all assessment of the firm’s position in the Cloud.
The stated ambition is stark and simple: in three years time, Dalgaard wants to see SAP as the number one Cloud firm. He’s going to measure this using three metrics:
- "the net promoted impact and excitement we bring to our users"
- "the totality of relevant easy, and both expected, but also first to market applications"
- "the total sales volume of our business"
From Dalgaard’s perspective, the good news is that SAP has a lot of resources to hand to support this ambition: “We now have over 5,000 colleagues in the Cloud business,” he states. “It’s clear we have some extremely smart, very experienced super-strong people, who are dying to lead, and to be lead and who have a lot of aspiration and burning desire to make SAP win the Cloud, and make customers fantasize about our products.”
But he concludes: “It was clear from my business reviews and meetings with many of you, that we have not had a clear and focused strategy in the Cloud. The challenge is not that we do not have enough resources, we have been given all the resources we need, and we will not ask for more.”
Not enough customers, not enough sales
The bad news is there aren’t enough customers yet, he admits – or enough sales. Dalgaard reveals that while SuccessFactors itself is 7% ahead of plan and saw 59% growth last the last quarter, the On Demand products from SAP are not on plan for the year. The implications here for the ‘native’ SAP teams will presumably not be missed…
Dalgaard also offers up the startling statistic that SAP’s On Demand operating margins are currently -64%. (“Yes, that’s a minus”, he adds for emphasis) while SuccessFactors operating margins are apparently 83%. Again, there’s a message to SAP staff coming through loud and clear at this point.
The plan of attack
So that’s the backdrop; what’s the plan, Lars? It’s a two fold top line objective:
- “We need less products, and focus more of our great people, from development to sales and customer support, on fewer products that can compete now, and sell now.”
- “We need to do [more] to make SAP credible, then we can become relevant, and competitive in the Cloud. Then we can accelerate pipeline, and then excite customers, close a lot of business, then implement it in weeks, not months, and mass import and integrate data and make the client successful, renew and upsell.”
From a credibility perspective, Dalgaard reckons that SAP is being seen to eat up its own dog food nicely, moving SuccessFactors over to all of SAP’s On Demand solutions and chucking out the firm’s existing instances of Salesforce.com, Concur, RightNow, OpenAir, Coupa, Avalar, Onbase and NetSuite.
What this means is that SuccessFactors is in fact SAP’s biggest On Demand customer. “All of our Cloud solutions are being put to the test in real, production environments – it’s the first step to understanding what our customers actually need!,” says Dalgaard. "It’s the only way to sell, when you use your own products.”
At a more detailed level, Dalgaard calls for more focus and will target four key markets, all benefitting from social, analytics, content and mobile:
- My PEOPLE: Human Capital Management (HCM)
- My MONEY: Finance
- MY CUSTOMERS: Customer Relationship Management (CRM)
- MY VENDORS : Procurement
Dalgaard posits that most customers are not ready to buy “a total Cloud suite” yet, but they will buy “multiple products, loosely coupled together, especially in the enterprise”. To that end, he wants SAP to provide “an integrated menu of business streams that allow our customers to choose the solutions that work within their environments and in addition, experience a consistent user experience and process integrity.”
That said, SAP will continue to offer ByD for mid-sized companies and subsidiaries and B1 OnDemand for small businesses “where there is a demand for a full suite option. Products not listed will continue to be closed out for deals that are live, or in pipeline, selling must continue, customers will be taken care of… but majority of our focus will be on the products mentioned, to get focused and not boil the ocean.”
He wants to see an Open Platform and integration technology to allow our ecosystem to easily extend their SAP solutions. Integration will include SAP on premises offerings so that customers can say “I still have one throat to choke, I can buy if all from SAP and get as much Cloud as I can handle leveraging my infrastructure.“
All of this will be executed by a combined Cloud Business Unit with end-to-end responsibility from sales, to development, to customer service. To that end, Dalgaard has established a dedicated Go To Market team with a specific objective: take out Salesforce.com, one of the two Cloud companies (along with Workday) that is “most likely to hurt SAP’s customer base”, according to Dalgaard.
In Dalgaard’s assessment, Salesforce.com is the primary competitor followed by NetSuite and Ariba. That last name of course will cease to be a threat if SAP’s planned takeover goes smoothly.
So overall, it's a typically bold and sabre-rattling battle-cry from Dalgaard, but one which is underpinned by his mantra "The customer must win". No-one should doubt Dalgaard's passion - he's demonstrated that time and again at SuccessFactors - or his commitment. The question remains how well all this goes down in the SAP culture, but given that the firm is spending billions on its Cloud gambit it would seem foolish not to listen to the man whose got the experience in this field - and the one with the positive operating margins!
More intruigingly for the external observer is the clear targeting of Salesforce.com as a threat to be dealt with. If anyone ever doubted that Dalgaard and Marc Benioff were destined to be on a head-on collision course they can cast aside those doubts now. The Cloud market may yet not be big enough for the both of them...