- SAP gained cloud market share exclusively via acquisition. This playbook demoted in-house development into a second-class citizen.
- We cover how SAP’s dysfunctional acquisition strategy works.
Bill McDermott became CEO at SAP February 7, 2010.
His goal was to make SAP number one by market share in cloud apps.
He looked at the market and found lots of fragmentation.
Many smaller app companies waiting to be “consolidated”.
Bill went on a shopping spree in 2011 and never stopped.
Between 2011 and 2018, SAP acquired
Crossgate, SuccessFactors, Ariba, Hybris, Fieldglass, Concur, Callidus, and Qualtrics.
In the same 8 years, SAP also acquired
Coresystems, Recast, Gigya, Abacus, Plat.one, Altiscale, Fedem, Roambi, SeeWhy, KXEN, Camilion, SmartOps, TicketWeb, Syclo, Datango, RightHemishpere, Crossgate, Cundus, and Secude.
The Cloud Story
Every cloud app SAP sold since 2011 was acquired not developed internally.
Acquiring three companies every year for eight years looks great on Excel sheets and sounds great in press releases.
Instant revenue growth, more market share, and more products. In reality, getting that many companies, teams, and products working together is absurd.
Too many apps that were never designed to work together.
None of the acquired cloud apps is integrated with SAP’s core.
The acquisitions just transferred the fragmentation to SAP’s product portfolio.
Dozens of functional silos added to SAP and customer landscapes.
Tech stacks and technologies that don’t work together.
Duplicate apps and overlapping functionality.
High cost and failure rate of integration projects.
Internally, SAP sales targets were never achieved.
Product development and integration deadlines never met.
Eventually, SAP called in a “cleaner”.
Elliott Management convinced the board to remove top SAP sales and product executives and approve a massive restructuring plan to consolidate the exploding portfolio.
Multiple products to be “de-emphasized” then jettisoned, others combined or replaced by technology partner offerings.
Thousands laid off last January.
8 years of acquisitions (instead of in-house development) killed the engineering culture at SAP.
SAP in-house development still builds apps using ABAP and 4GL NetWeaver technology.
Other than that, great strategy.
The Problem: A Lack of Fact-Checking of SAP
There are two fundamental problems around SAP. The first is the exaggeration of SAP, which means that companies that purchased SAP end up getting far less than they were promised. The second is that the SAP consulting companies simply repeat whatever SAP says. This means that on virtually all accounts there is no independent entity that can contradict statements by SAP.
The Necessity of Fact Checking
We ask a question that anyone working in enterprise software should ask.
Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?
If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.
In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.
Financial Bias Disclosure
Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.
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