SAP: Less Ego, More Success

Hasso Plattner, its hard-driving co-CEO, discovered he couldn't fix his company alone

When German software giant SAP (SAP ) runs into a glitch, Hasso Plattner, its red-meat-for-breakfast co-CEO, figures out what is wrong and fixes it with his own bare hands, if necessary. That's how he responded in February, 1999, after he got the bad news at an executive retreat that the company was hopelessly behind on the Internet. Unless SAP did something fast, this would end its era of dominance as the leading maker of run-the-company software applications for the world's big corporations.

Plattner reacted like a man shot out of a cannon. In a matter of days, a series of frenetic brainstorming sessions yielded a brand-new strategy, which he personally christened SAP's array of software programs would be made Net-ready before the end of the year, and millions of office workers from Berlin to Bangkok would tap into the Net and their own companies' networks on computer screens with SAP's logo on them. "We want to be the portal through which businesspeople access everything," he said later. "It's like AOL--for corporations."

It was a grand vision befitting one of the software industry's most successful leaders. Problem was, it didn't work. When arrived seven months later, customers were confused about what the products did, and the $50 million ad campaign flopped. In the company's crucial Americas region, revenues actually declined 3% in the first quarter of 2000. So Plattner did something completely out of character: He admitted that he and SAP couldn't handle this on their own.

FLEXIBILITY. What followed is one of the most surprising personal odysseys in the annals of tech. As one of the top two executives at SAP since its 1972 founding, Plattner had built a corporate culture in his own image: engineering-focused, headstrong, and determined to do it all without help. That stiff spine made SAP into the third-largest software company in the world. But Plattner realized after was slow to take off that it wasn't enough just to Web-ize his products. Unless he and his company started doing things differently, both could be washed up. Now he's busting apart the edifice he built piece by piece--keeping what's good and rejecting the rest.

It's all about being flexible. SAP used to build nearly all its core technology itself. Now it has deals with upstart Commerce One Inc. (CMRC ) for business-to-business Web software. Convinced that its way was always best, SAP used to strong-arm customers to buy one massive conglomeration of bolted-together software programs--applications that did everything from managing financials and human resources to planning and manufacturing. Now SAP makes it easier for customers to pick and choose between SAP products and software sold by others. And Plattner once figured he could have the last word on marketing. Today he relies on a pro--Martin Homlish, formerly of Sony Corp. (SNE )--and took the surprising step of moving marketing from Germany to Manhattan.

His efforts are starting to pay off. In the first quarter, SAP's revenues grew a more than respectable 29%, to $1.36 billion. And SAP logged $106 million in profits, more than double the quarter a year earlier. Analysts forecast the company will meet its goal of attaining better than 21% revenue growth for the first three quarters of this year. ABN AMRO expects SAP's profits to rise from $596 million last year to $800 million this year and $1.1 billion the next. A humbler Plattner is making his company a force to fear in e-business.

That's humbler, not humbled. Plattner can't suppress his I-told-you-sos. "People say we're back," says Plattner, a pit bull of a man with a squared-off jaw. "We were never gone." He predicts corporations will buy e-business software to make themselves more efficient and to goose revenue growth. As evidenced by SAP's strengthening sales, he believes they're relying more on large, well established software makers such as SAP, rather than the upstarts.

If he's right, the corporate computing world is about to be turned on its head. For much of the 1990s, big companies dominated the landscape. After browser maker Netscape Communications Corp. (AOL ) burst on the scene with its vision of Internet computing, the biggies seemed to be on a path to irrelevance. Dozens of upstarts emerged as the darlings of corporate software buyers. Ariba Inc. was the pioneer of procurement over the Web. Commerce One was first to set up exchanges linking buyers and sellers over the Net. Now the old gunfighters are staging a counter-attack, and the upstarts are hurting. In April, Ariba laid off one-third of its staff. Lawrence J. Ellison, chairman of SAP rival Oracle Corp., also says corporate customers now prefer dealing with established companies. "It will be us and SAP, SAP and us," he predicts.

Still, it will be extremely difficult for Plattner to remake SAP into one of the leaders in the next era of computing. Thanks to the dot-com collapse, he has a chance to make up lost ground. Indeed, he has retooled before. In the late 1980s, when SAP was a maker of software for mainframe computers, he transformed it within two years into a maker of applications running on networks. Back then, though, he was the pioneer. Now, he's playing catch-up. His challenge is to leapfrog nimble competitors and start setting the pace again.

Plattner has much to prove. SAP's share price is hovering around $30, less than half its peak of $84 in March, 2000. Its relatively healthy revenue growth may be misleading because its first-quarter results came off that bad year-ago quarter. SAP's core market for corporate-finance and human-resources software, where it has a dominating 32% share, is growing at less than 10% per year, and, overall, only 30% of its sales are to new customers. Moreover, it's still a minor player in newer markets such as customer management, which includes sales force automation and e-tailing. That sector is growing at a 40% clip. Last year, according to AMR Research, SAP grabbed just 2% of the market, while leader Siebel Systems Inc. had a 17% share.

FANTASTIC FOUR? Plattner is acutely aware of his problem, and he's working on it. He has targeted a quartet of product areas that he hopes will spark growth: customer management, supply-chain management, e-marketplaces, and corporate portals, which allow employees of corporations to tap easily into internal data through the Web.

Besides, he's happiest when he's wrestling with a challenge. That spirit permeates his life--from the boardroom to his world-class racing yacht, Morning Glory. He'll keep fighting even when the stakes are impossibly low. For instance, last year, during a break from the annual meeting of the company's investment arm, SAP Ventures, Plattner arranged a race between teams of investors in rented yachts in San Diego harbor. At one point, with Plattner at the helm, his boat was on a collision course with another. "Hasso's yelling at the other guy that we had the right of way. In the end, the other guy turned off. We missed by a few feet," recalls Gordon Hull, a venture capitalist at CMEA Ventures in San Francisco. "He's got nerves of steel. I wouldn't want to compete with him."

Plattner's passions have a way of getting the best of him. Take the famous mooning incident. In 1996, during a race off Hawaii, the mast of Plattner's boat broke and one of his crewmen was injured. The way Plattner tells it, the shore crew of Ellison's racing yacht, Sayonara, buzzed by in a dinghy, but rather than stopping to help, they circled Morning Glory taking videos. (Ellison denies his crew ignored a call for help.) "It was the most unsportsmanlike thing I've ever seen," says Plattner. "I showed my behind to their video camera."

"STREET FIGHTER." That out-there personality seems rooted in his childhood. Born in 1944 in Berlin, Plattner's earliest memories are of sailing with his parents, Horst and Inge, on the lakes around the rubble-strewn city. His father, an eye surgeon, did not fight in the war. Still, there was a sense of peril. Plattner remembers seeing British jets landing with provisions during the 1948 airlift that broke Russia's Berlin blockade, and he saw one plane crash. Rather than becoming fearful, he grew up confident. "I'm a Berliner--fast, loud, obnoxious, industrious, brutally open," he brags.

The battler in him emerged during adolescence. After his parents divorced, he was sent at age 15 to a strict, military-style boarding school in Bavaria. It was like moving from Manhattan to Texas overnight. "I had to become a street fighter," he recalls during a recent dinner of beef-cheek ravioli at Babbo, a trendy New York restaurant. Despite jet lag and an overstuffed day of meetings, Plattner is full of energy. His eyes grow wide and he fingers scars on his wrist and hand as he tells how upperclassmen picked on him because he was a city slicker. "Once I pushed a big guy into a glass cabinet, and it shattered. I still have the scars," he says.

Other early influences shaped Plattner's career. He worshiped John F. Kennedy. "He had a vision," Plattner says, shifting into a nasal Boston accent to mimic Kennedy's voice: "We want to get to the moon in 10 years." For a kid growing up in beaten-down Germany, Kennedy represented the promise of a new, can-do era. When Kennedy was shot, Plattner was devastated. "I couldn't believe it," he says. "I went to bed and listened to the radio." Plattner followed in the footsteps of a grandfather and studied engineering--intent on being where the action was.

The future, it turned out, was to be built on electronics. In college, Plattner studied telecommunications, since a computer science program wasn't available. Upon graduating, he got a job as a sales consultant for IBM in Mannheim, Germany. That didn't last long. He left with four colleagues in 1972 to form SAP after they were rebuffed by IBM when they suggested creating a financial-software package for corporations. Their novel idea: to replace expensive custom applications with off-the-shelf packages. Since then, Plattner has been the company's cheerleader and visionary, mapping out technology and strategy while the original chairman, Dietmar Hopp, managed the business. Plattner became the No. 1 executive in 1998 when Hopp resigned and has remained SAP's spark plug.

Sometimes, though, he has been the sludge that clogs up its engine. This is the dark side of Plattner. Even though customers complained for years about how difficult SAP's products were to use, Plattner didn't launch a campaign to fix that until 1998. He long refused to believe that marketing was important, and that cost SAP dearly in the competition with image-savvy Ellison. Plattner's pride in SAP sometimes blossoms into full-blown arrogance. At a software industry conference in Monterrey, Calif., in 1998, "Hasso shocked people by saying he didn't believe SAP had to form alliances with anybody," recalls Mark B. Hoffman, CEO of Commerce One.

Plattner's change of heart has been remarkable. In early 2000, even as he was forming SAPMarkets, an independent e-marketplace subsidiary in San Francisco, he accepted an invitation from Hoffman to talk about creating a partnership between SAPMarkets and Commerce One. Ultimately, over several months of talks, the two decided on an unusually close relationship in which they would co-engineer a new suite of integrated products. Plattner recalls that a high school art teacher taught him to be flexible. "He said: `When you reach the point that you don't change your mind anymore, you know you're old,"' recalls Plattner. Now it's one of Plattner's mantras. "We have to be able to adapt to new situations," he says.

Plattner's ongoing project is turning SAP's engineering culture inside out. In spite of his push for alliances and a program of setting up nimble, independent subsidiaries, the organization remains insular and slow to change its ways. His goal is to make sure SAP's products are created with maximum input from customers--rather than in cloistered isolation by engineers at the labs in Walldorf, Germany. SAP's engineering groups are now plugged into the sales organizations. SAP America, for instance, has lined up 100 customers to be "development partners" that actually help write code. Customers appreciate the way Plattner is operating. Enporion, an e-marketplace for the utilities industry, uses software from Commerce One and SAP. "I give Hasso Plattner a lot of credit," says Michael Johnson, its chief information officer. "He saw he had to transform his company [so it could] address e-commerce between companies and between industries."

CORPORATE COOKERY. That kind of overhaul takes dogged persistence. Inside SAP, Plattner is like a chef--constantly stirring the pot. He spends about one-third of his work time in California, one-third on the road visiting customers and SAP offices, and the rest back at headquarters in Walldorf. At the home office, he typically arrives around 10 a.m., often with a new idea he wants to try out on his colleagues. The planned schedule usually gets thrown out, replaced by impromptu meetings in his fourth-floor office.

While Plattner believes in obtaining consensus among his lieutenants, he doesn't care how much he irritates people along the way. In fact, his confrontational style is deliberate. "He creates stressful situations. He fuels the discussions with provocative statements. Sometimes he's rigid, even rude. But it's about getting people engaged so they can be creative," says Wolfgang Kemna, CEO of SAP America, a 13-year SAP veteran. Co-CEO Henning Kagermann, whom Plattner elevated to work alongside him in 1998, is his counterweight in the organization--calm and efficient.

Since he vowed to change his ways, Plattner doesn't try to do everyone else's jobs. Kagermann, for instance, runs sales and finance. That's not to say that Plattner sits back passively and watches how others work. He has been the acting CEO of SAPMarkets since it was formed. And Plattner personally manages the relationship with Commerce One, making sure it doesn't fall apart--which happens to most high-tech alliances. "He's absolutely the change leader at SAP," says Jack Barr, a former top sales executive at SAP America who is now head of sales at e-commerce startup Atlas Commerce Inc. "He's the guy who saw what was happening and would drive in that direction."

Sports is how Plattner burns off excess energy. He's an avid golfer. He owns a golf resort, Fancourt, in South Africa, which he adopted as a second country after his mother moved there in 1970. He has a practice hole in back of his 250-year-old house in Schriesheim, 40 kilometers from Walldorf. He skis, snowboards, and plays tennis.

Plattner is ultraprotective of his family. He won't permit interviews. Partly it's out of concern for their safety, he says. But he also has some regrets about the effect of his career on family life. He and his wife, Sabine, are separated. Neither of his two daughters, one studying biology and the other a budding actress, is interested in following his footsteps into business. "They saw the stress on me, the absence from home, all the things that come with my kind of successes," he says.

With a 10% stake in SAP worth $4.5 billion, Plattner has been richly rewarded. Now he's giving some of his money away to help places with big problems--including $6 million to combat AIDS in South Africa and $55 million to the University of Potsdam in former East Germany. "I want to engage in battles and win them," he says. "You have goals. Now the goal is to pass Siebel."

At the rate Siebel Systems is growing, though, that will remain an unattainable goal for a long time. But given Plattner's ferocious personality, it's unlikely he'll give up trying.

By Steve Hamm

With Stephen Baker in Paris

— With assistance by Stephen Baker

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