- SAP CEO Christian Klein was interviewed by Diginomica.
- We fact-checked this compliant interview.
Diginomica recently published an article where Denis Howlett interviewed SAP ECO Christian Klein. The interview was quite interesting, but only if one reads between the lines.
Establishing the Nature and Background of the Participants
First things first. Let us talk about who Christian Klein is.
Christian is the previous SAP Controller and has no technology background of any kind. It is only due to the compliant IT media that they have not observed that Christian has no business as the head of SAP.
Secondly, Christian is 38 years old. Why is a 38-year-old heading SAP when there are far more qualified individuals in SAP for the job? Well…..Hasso needs a puppet as he is not allowed to run SAP due to German law and his advanced age. Therefore he needs a proxy, someone who would never think of challenging him. Christian is “playing” a role, which is CEO of SAP.
In the great movie The Hudsucker Proxy by the Coen Brothers, the board of “Hudsucker Industries” selects a proxy to run the company who is unqualified to depress the stock price so they can then buy it cheap themselves. (The scene stops at the 2:54 mark.)
As the board says in this scene.
“What we need now is a new president who inspires panic in the stockholder. A puppet, a proxy, a pawn.”
As Paul Newman’s character says.
“Sure sure….some jerk we can really push around.”
This is not to say that the plot of the Hudsucker Proxy and SAP (or really Hasso’s) selection of Christian Klein is identical, and there is no intent to depress the stock price — but selecting a proxy that can be pushed around is the same.
So after we get that out of the way — it is clear that Christian is being fed his lines by others inside of SAP. It is not coming from Christian authentically. Christan might be more credible, talking about discussing cash management.
As for his views on technology — who cares?
Now let us talk about Denis Howlett. Denis loves to talk to powerful people. Denis measures a comment not on the basis of its intrinsic content (that is, is it true or false), but on the basis of the status and power of the person making the comment. Therefore, if a homeless man describes the law of entropy in perfect detail, but Elon Musk proposes that he developed a perpetual motion machine, Denis’ natural tendency is to disregard the homeless man, and believe Elon Musk. After all, kissing up to a homeless man does nothing for one’s career.
This orientation of status over what is true is important to building a successful career in serving as a repeating mechanism for the most powerful people. This eventually helps those powerful people become completely self-aggrandizing. As they become more powerful, fewer people challenge them.
Pretty soon they, naturally, consider themselves to be brilliant and specialists in areas of expertise they have no knowledge of very little knowledge. This is why Bill Gates, with no education or experience working in either medicine or epidemiology, is now a source on information on disease, and notice how media entities present him as an expert to their audience.
This is how Napoleon had himself depicted at the end of his reign. This descent into madness was enabled by a number of people who would never challenge him. This is where we are all headed when everyone around us tells us how great we are.
So, Denis would not think of asking a challenging question as he is intoxicated when he speaks to the powerful.
Therefore, this interviewer is problematic. If Denis were to interview any powerful person, he would naturally defer to them.
Now we have set the stage correctly with the context that we have an interviewee who does not have any particular technology background or insight, and an interviewer who is so happy to have the CEO of SAP that he will show complete compliant docility in the interview.
So let us now move to the content of the article.
The Interview Quotations
Here Denis introduces and provides background information to the quotation from Christian.
As expected, he reiterated the broken nature of the co-CEO model but provided more color on the reasons behind the recently announced change. As I thought at the time, the co-CEO model was difficult to operate when both he and Morgan needed to be on the same page while sometimes having to take decisions on an hour by hour basis. But it went deeper: – Denis Howlett
In the following quote, Christian quickly pivots from the topic of why Jennifer Morgan was removed as co-CEO and from the company to a discussion around hyperscale providers.
There were disagreements, as you’d expect, but there were some of a fundamental nature where we could not delay the decisions. I’m fully convinced that the hyperscalers will also go up the stack.
What does the first sentence have to do with the second sentence? Also also, should I begin writing like this? Let see how that would go.
I think Battlestar Gallactica was a very underrated Si-Fi show, there is no doubt that hyperscale providers are going to go up the stack……and by the way are you going to finish that toast or can I have it?
I guess I could give it a try.
I believe there is a type of writing perfected by James Joyce called “stream of consciousness,” where you just write whatever comes to mind, but its probably not the right writing style for analysis.
There could be two reasons for Christian’s abrupt transition.
- One is that Christian wants to move off of the topic of the failed co-CEO experiment.
- The other is that Christian has been fed lines that he has to say, and he does not know when to say them.
And these are not mutually exclusive.
Being uncomfortable and seeking to transition, often leads one to transition abruptly, and hence to a fed line.
Evidence of Christian Klein Being Coached Up
This reinforces what I have proposed that Christian Klein is being given lines to say — and therefore, like reading from a script, if you lose your place, you don’t know how to transitions between topics.
Let us take a look at a clinic on discontinuous presentation of information. Ordinarily one might think one would have to get a video from a mental health entity that specializes in mental disorders or Alzheimer’s. However, we are fortunate in that in the US we have presidential candidates that demonstrate discontinuous presentation of information. So the material is easy to find. No need to go to the videos at the Mayo Clinic.
Joe Biden is demented and has to be given notes to read from. Notice in this presentation how he constantly loses his place as he is speaking. There is no continuity from one topic to another, and betting “lost” leads one to change the subject.
Either having dementia or a lack of authentic understanding of topics you are discussing leads to discontinuities as one is answering questions or speaking on subjects. If you asked me to explain the endocrine system, I would also have to bounce around because I only have a very basic level of understanding of how it works. However, an endocrinologist will easily be able to stay focused and continuous in their explanation of the endocrine system.
The quote from Christian continues, but as we will see, what is transitions to is not coherent, and the intended information must be teased out of the statement.
In the partnerships, we are closing, we have to own the business platform, we have to own the application layer. I want to be more prescriptive on that because when you are losing more and more of the control of the customer transformation when you’re not sitting on the table anymore, when they’re making the decision how to transform the business model, then it gets difficult.
This quote is opaque.
Let us take each area of the quotation in turn.
SAP Must Own the Application Layer?
First, SAP does “own the application” layer for the applications it sells. But Christian’s comment could mean also that SAP needs to own the entire applications layer at a customer. This is, of course, monopolistic intent but would also be terrible for any SAP customer that allowed it. The only reason that companies that use SAP can function is that they either use other applications along with SAP, use custom reports, customize SAP, use Excel, etc.. SAP sells inefficient applications into customers — I don’t know any customers where SAP “owns their application layer.”
SAP often says in their advertisement that a certain number of companies “Run SAP.”
Who has not seen these types of advertisements at the airport? LPP probably does use SAP, but they don’t use it exclusively, and no one does. SAP does not “own the application layer” at LPP they offer applications that are used with other applications. All companies seek to monopolize the purchasing of their customers. That is why the initial intent of antitrust legislation is to stop companies from building monopolies, something due to corporate capture, we have greatly reduced doing in the US at least.
The rest of the quote seems to imply that Christian is saying SAP is losing power.
And this is true.
SAP, while still very powerful, is less relevant than it was in the past. Furthermore, SAP is not transforming anyone’s business. I have been in SAP accounts since the late 1990s, and I never one time observed anything being transformed when SAP was implemented. And of course, the term “digital transformation” is an entirely false construct as I cover in the article The Problem with the Term Digital Transformation.
Christian’s Real Complaint: Digital Transformation Limitations or Selling Limitations?
The primary issue here is not transformation, but SAP’s ability to charge companies. No one, particularly at the top of SAP, cares about any value delivered to companies, transforming companies, etc… They care about being able to sell software and control the account, and they care about their own personal compensation. That is what Christian is in a way of complaining about. SAP, due to is decades of broken promises, is finally starting to feel a headwind when selling into accounts.
I don’t know what to say to Christian here.
But how long should companies continue to hand over everything to you if what you say consistently does not come true?
The quote from Christian continues.
I just want to make sure that now in these partnerships, we try our best to make sure that we are in the lead when it comes to business model transformation, when it comes to talks about how to move the system landscape, the application layer in the cloud. And it’s also important that we position our platform there, as we cannot afford to lose the platform game either, as this is the platform which keeps our applications together, makes the integration work. And it’s of course also very important for the extension of our solution. So, this is something where I would like to draw a much clearer line going forward, because in the past, I feel we were not clear enough in some of these partnerships.
This is a word salad. And furthermore, SAP does not have a platform. They sell applications. And for could, they pretend to offer a cloud, but in fact, they have their partners perform the hosting (i.e. not cloud) though something called the HANA Enterprise Cloud or HEC as I cover in the article Our Comparison of SAP HEC with Virtustream Versus AWS Analysis.
Nothing is “built” on SAP’s platform (unless one wants to include refactoring applications that should not be refactored into ABAP and placing them in SAP).
Christian’s comment continues.
We overcomplicate things, and we are not offering good enough holistic solutions for the customer. When you are coming only with pieces and fragments, then it’s hard for the customer to figure out, how do we solve my business challenge?
Yes, this is true.
As everyone who works in SAP knows is complicated (except to SAP salespeople, who think it is very easy — as they never have to actually log into it). And SAP is complex in every dimension – from the software to legal implications like indirect access, to terms and conditions, to dealing their their legal department, etc.. Even though the SAP Run Simple! the campaign went on for close to two years (as I cover in the article What is the Real Story with SAP’s Run Simple?), SAP is still extremely complicated and Run Simple did zero to change any of that.
Denis then inserts some comments related to cash management, supply chain, and automotive, which I will not critique here because they don’t have anything to do with anything Christian has said.
Christian then does comment on SAP’s cash management (which is one area he does know something about). However, I did not deem it as worthy of analyzing.
Christian continues on to the topic of supply chain management.
Christian Decides Its Time to Talk About Supply Chain: And SAP’s Customers Want Better Supply Chain Management Functionality?
On the supply chain, we are getting a huge amount of requests from customers to say, how can you help me with more intelligent software to overcome shortages and disruptions in my supply chain, and how can you better help me to find suppliers who can still deliver the goods I need? How can you help me to more flexibly adjust the supply chain to the demand as the demand is heavily changing these days? Demand plans are changing almost on a day by day basis. And these are exactly the points, which we have to focus on.
First, it should be noted how disjointed this comment is from the previous statements. Why did he transition to it, and why the specifics of customers asking for more from the supply chain. What was the point or direction of this interview, because it seems just to be all over the place. It appears I have to put more effort into organizing the interview than either Christian or Denis put into giving or conducting the interview, and it is not my interview.
Discussing the content of Christian’s comments on the supply chain. Immediately, you see the problem with Christian’s statement for SAP. It is that the customers are reaching out and asking for this. CUSTOMERS. Not prospects, customers.
This is because what SAP offers does not help companies in these areas.
SAP promised a supply chain transformation when prospects purchased R/3/ECC/Business Suite/S/4HANA, and nothing all that great happened. ECC is just a transaction processing system that has a few underdeveloped supply chain procedures contained with it called MRP and DRP (like nearly all ERP systems by the way). SAP’s APO has generally failed to meet expectations. IBP, APO’s pseudo replacement (replacing some parts, but not others) have also so far been disappointing and offers little advantages of over Excel with some custom development once all costs and efforts are taken into account.
But secondly, some of the requirements or requests from customers are not sufficiently specific for me to make sense from them. Demand plans may change day to day, but forecasting systems, including DP (although not Demand Management in the PP module in ERP), can typically account for this. If the forecast is changed through manual adjustment, then this can be done — again not in ERP and most SAP customers do not have APO or IBP. If the forecast is rerun daily, then everything is automatically updated. So I don’t know exactly what is meant by the statement..
“Demand plans are changing almost on a day by day basis.”
I don’t really see the point in including such a high-level description of five different issues in supply chain in SAP and then leaving it at that?
This is the CEO of SAP, who has a virtually unlimited budget to help him prepare for interviews with the media, and we are just getting an information dump of things that he has heard customers have said to SAP about supply chain.
The Obvious Reason for SAP Customer’s Supply Chain Demands
Overall, SAP misled customers by telling them if they purchased their ERP system they would never need a forecasting system, or that they would get some great supply chain functionality. I have spent decades in both ERP and APO, there is no impressive supply chain functionality in these applications and the usability is the lowest in class in each module or application.
So it is not surprising that customers may be asking for this, but the problem is that they are asking the wrong entity.
And no, this is not an endorsement of other supply chain vendors. We may like some supply chain vendors better than others, but the analysis here is simply focusing on what SAP offers in the supply chain.
This is typical of IT media coverage is that it is not challenging and functions as simply PR for the company being interviewed. I like reading Christian’s statements because he admits things that he does not realize he is admitting. SAP has spent a lot of time “coaching up” a person whose technology experience prior to taking the top job at SAP was using Outlook and Excel. I look forward to more confused and knowledgable interviews with Christian in the future. As I cover in the article What We Can Learn About Trump’s Inept Advice on Drinking Lysol for Treating Coronavirus, we only apply standards of competence to the lower level people. The upper level or elites can have no background and even no competence, and an army of compliant media, analysts, and other entities will legitimize them with no questions asked.