SAP Technology Chief Sikka Steps Down in Management Overhaul

May 05, 2014 10:01 am ET

(Updates with board meeting in sixth paragraph.)

May 5 (Bloomberg) -- SAP AG’s longtime technology head Vishal Sikka is leaving as Bill McDermott reorganizes the management team ahead of his ascension to sole chief executive officer of the largest maker of business-management software.

Sikka, a protege of co-founder and Chairman Hasso Plattner, ran software development, sat on SAP’s executive board and oversaw a database meant to gain share from archrival Oracle Corp. He is leaving for “personal reasons” less than three weeks before McDermott takes over as the only CEO, SAP said.

“It’s a bit tragic for the company to lose him,” said Mirko Maier, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, who recommends buying SAP shares. “For SAP it will always be important to have a technology visionary like Hasso Plattner. But the time will come when he will no longer be there -- and it takes some time to raise a worthy successor.”

McDermott is revamping SAP’s leadership as the Walldorf, Germany-based company pushes into products and services such as cloud computing amid rivalry from Oracle and Salesforce.com Inc. Application-innovation head Bernd Leukert will assume Sikka’s duties and join the board with sales chief Robert Enslin.

SAP shares fell 2.5 percent to 56.30 euros at 4 p.m. in Frankfurt. The stock is down 9.5 percent this year, giving SAP a market value of 69 billion euros ($96 billion).

McDermott’s Move

Sikka’s exit followed a meeting by SAP’s supervisory board yesterday and comes as McDermott is setting up the next generation of the leadership team, a SAP spokesman said. Sikka, 46, didn’t immediately return messages seeking comment outside regular business hours in the U.S., where he is based.

McDermott, an American who’s been co-CEO with Jim Hagemann Snabe for four years, becomes sole CEO as Snabe quits his role May 21. McDermott, 52, also plans to spend more time in Germany.

SAP, co-founded by Plattner 42 years ago, delivers complex software for managing financials, inventories and manufacturing to more than 253,000 companies. It is trying to deliver more of its products as online services, setting up a new phase of competition with Oracle, Salesforce, Microsoft Corp. and others vying to occupy the same ground.

Sikka joined SAP in 2002 and was put in charge of overseeing development across SAP a year ago as the company pushed further into software delivered as Internet services. His exit continues a shuffling of executives that includes Snabe leaving and last year’s departure of Lars Dalgaard, a board member who had been CEO of SuccessFactors Inc., a Silicon Valley software maker SAP bought in 2012.

Hana Effort

“The departure shows that SAP remains a company in transition with sole CEO Bill McDermott emerging as ultimate winner leading a sales driven company on its way into the cloud,” Thomas Becker, an analyst at Commerzbank AG, said in a note to clients. “This is quite a surprise as Vishal Sikka was seen as Hasso Plattner’s extended arm.”

Under the tutelage of Plattner, 70, Sikka headed development of database software called Hana, which generated 633 million euros in revenue last year, up 61 percent. The software, which debuted in June 2011, has sold more than 1 billion euros to date, a spokesman said. SAP stopped reporting Hana revenues as a separate item this year.

The database, which SAP said can speed up processing transactions and analyzing data in the company’s flagship Business Suite and other applications, is the company’s bid to gain a greater share of businesses’ information technology spending from Oracle, whose market-leading database is often bought in conjunction with SAP.

Sales Miss

Adding Enslin and Leukert to the board will help advance the transition to cloud computing, SAP said. Enslin, who joined in 1992, will continue to lead global sales, while Leukert, hired in 1994, will take responsibility for the global development organization.

Last month, SAP reported first-quarter sales and earnings that missed analysts’ estimates as increased sales from cloud computing were muted by a slowdown for older products and a strong euro. Sales this year may grow 4 percent to 17.54 billion euros, according to data compiled by Bloomberg.

SAP also added Helen Arnold and Stefan Ries to its global managing board. Arnold, an 18-year veteran of SAP, will assume the role of chief information officer, and lead cloud operations and the Hana Enterprise Cloud. Ries had recently rejoined SAP to lead global human resources.