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as president and CEO of sap Americas
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Bill McDermot is responsible for
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managing the German software developers
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strategic initiatives in the US Canada
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Latin America and most recently in Japan
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China and India sap America's
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headquartered in New Town Square
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Pennsylvania provides collaborative
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Business Solutions to companies in 25
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different Industries in a recent
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interview Wharton management professor
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zott chod asked McDermot for his views
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on where enterprise software is headed
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and how the company has leveraged
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worldwide resources to deliver its
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services globally the two also discussed
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sap America's relationship with
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Microsoft and threats the company faces
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from arch rival Oracle thanks so much
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for coming bill it's a pleasure to have
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you here and look forward to having a
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conversation about Enterprise software
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Trends the competition and the like
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thank you sagot so what are your
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thoughts on Enterprise software I mean
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where is it headed where are the trends
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where are you positioned in all that the
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customer today wants a trusted innovator
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and they are standardizing their
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business processes on proven platforms
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platforms that are well integrated and
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Global any customer whether it's small
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mid or large is Thinking Beyond their
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Geographic boundaries beyond their
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current markets they have to innovate
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they have to grow so the Market's in
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favor of big proven Brands and it's not
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going to be nearly as friendly to small
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riskier
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plays yeah I think that uh makes a lot
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of sense I mean I see a push towards
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business intelligence for example why is
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that there's a major uh gap between
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strategy and execution if you talk to
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most CEOs today and I do all the time
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they have great strategies you can look
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right behind their desk on the credenza
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three ring three ring bound strategy
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documents Galore and they're great the
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issue that they all have though is how
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do you execute that strategy so the real
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art form is taking strategy to execution
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and then renewing that loop on a
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continuous basis business intelligence
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actually allows you to do that how do
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you get the data the information and the
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knowledge in the hands of the executive
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to make well-informed real-time
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decisions mhm so if the era of internet
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or web 1.0 was really about amassing
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lots and lots of information getting
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access to it maybe the 2.0 world will be
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about using that effectively and uh
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perhaps not as it won't be as difficult
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to sift through data but it comes to you
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in the form that you need it is that the
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kind of uh Vision that that you foresee
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exactly as an example when sap acquired
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business objects we obviously did not do
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so to acquire revenue or market share we
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were already the market leader we did so
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because it offered a platform agnostic
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technology that could extract data and
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aggregate data from any platform or any
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source that is because the sea level
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decision maker has to be in real time
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and they have to have the knowledge at
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their fingertips including mobile uh so
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they can make those calls and Advance
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their company now IBM also bought cognos
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at that time or similar time so how's
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that relationship going because you work
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closely with IBM right IBM is a great
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partner a very strategic friend to sap
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and it's only natural that at times we
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will have um co-opetition if you will in
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these relationships and that's fine um
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IBM provides a great service to their
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clients and there will be times when
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that's the right decision for IBM
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clients and we fully accept that um but
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never mistake the importance of IBM to
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sap and I think sap to IBM MH speaking
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of coopertition I mean Microsoft is
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another company that you have an
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alliance with um and I raised that not
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just in terms of relationship but you
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spoke of
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platforms and you know there was a time
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when people were talking wouldn't it be
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nice to have an integrated platform back
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office and front-end applications is
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that just a dream well uh Microsoft
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would be another example of a very
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important partner and yes it is true in
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certain segments of the market we do
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compete but we see the importance of
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connecting the desktop in the case of
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Microsoft
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to the Enterprise applications of sap
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and create an experience for the
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customer that is truly world class and
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far more productive that is why we
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co-innovate and developed a product that
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we call duet which essentially links
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that desktop and the Enterprise
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applications of sap for example uh many
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knowledge workers get up in the morning
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they click into their email and they'll
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be making decisions such as providing
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someone a raise or giving them some time
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off right in their email system wouldn't
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it be nice if that was automatically
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updated in the Enterprise HR System of
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sap and we now obviously do that with
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our product called Duet so Microsoft
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again a very strategic partner and
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friend sap MH so you see that as as a d
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another Direction which all this could
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head right yeah but you know what the
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common theme is if it's in the best
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interest of the customer you should do
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it and there will be times where these
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relationships will have strain on them
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because of certain competitive scenarios
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but you have to get past that because
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we're big Brands we're Market leaders
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and the customer deserves the best from
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all of us so where's Google in all this
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because everybody seems to think about
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Google no matter what industry they in
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these days but in particular it might be
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relevant from the point of view that a
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lot of applications are going to the web
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uh it's becoming an alternative platform
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how do you see this as an opportunity a
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threat bit of both uh I think it's more
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of an opportunity I think Google has
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done a great job of providing
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information to the Casual user and the
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information worker and clearly the cloud
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computing concept is something that's
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here to stay and therefore Google has
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created great search great cloud
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computing and I think it's forced
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everybody to think more productively
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about that user experience and how you
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can get that information into the user's
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hand in highly productive lowcost ways
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so credit to Google so do you think that
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Google's limited to the casual user as
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you phrase it or or do will that have
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Enterprise uh implications as well well
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I think there's going to be
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collaborative relationships between
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Google and search and some of the
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Enterprise leaders like sap over time
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and that's the way it should be because
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I think again that'll give the customer
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more yeah and you've sparked a thought
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in my mind you know uh social networking
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is another hot area Facebook and the ler
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talked about a lot we think of it more
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in the consumer sense but actually from
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a human resource point of view people
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management point of view uh allocation
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to projects understanding capability
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strength skills uh weaknesses and what
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people are thinking that's also a
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fantastic application for Enterprises
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right yes it is in fact uh right here in
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Philadelphia there are small companies
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that are innovating today to provide
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Facebook like services to Big
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corporations and more and more they're
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trying to extract from the Enterprise U
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Market pull to their sites because they
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think think they can help businesses
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with things like advertising Affinity
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networking and marketing Etc so that too
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is a trend that is here to stay and
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since you mentioned Philadelphia um what
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is the role of sap America right now I
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mean it's been evolving over time
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paloalto has also built up a strong base
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but that's been fluctuating over time as
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well but that's an important center but
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at the same time you're expanding in
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Europe you're expanding in China India
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and other uh markets as well and you're
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setting up centers for R&D application
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development all over the world how does
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this all fit together yeah it's a good
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question um development in Philadelphia
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as an example is real it's also real in
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Montreal and it's also real in Europe
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and India and parts of China and um
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Eastern Europe so what you're seeing now
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is global development at SCP but SCP
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America in the context of New Town
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Square in particular m is a hugely
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important site to us as we've created uh
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thousands of jobs across the US in these
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last 6 years we became the Undisputed
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market leader and we also believe
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strongly in given back to the community
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I think if you've watched what we've
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done here in Philadelphia whether it's
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on the education side um with
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organizations such as Kip and some of
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the inner city schools and uh building
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playgrounds with Kaboom and homes with
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John Bon Joi we really tried to be part
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of the community and we really believe
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in that and recently I was with Jack
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Welsh and we had a conversation on the
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concept of giving back and it's
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something that you can do when you're
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winning right because you have something
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discretionary to give back so we're
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careful to explain that you know our
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people love to do it and we love to help
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them do it but keep winning that's the
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key to doing it that enables you to do
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that exactly yeah and from a business
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point of view um having these multiple
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centers around the world is obviously
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very useful ful to develop in real time
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247 how does this work seamlessly I mean
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you've held different positions in
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different parts of the world how do you
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see this it's a 24x7 world I mean if you
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think about the customer which is the
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essence of everything I am that's the
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DNA yeah the customer operates in a
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global economy and they are operating
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their business on a 24x7 basis so
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whether it's active Global support
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watching over their success 24x7 in
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every corner of the world or it's sales
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service Consulting and all the customer
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facing activities you have to constantly
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be on what I love about global is um
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constantly being on in every single time
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zone and constantly being in real time
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on what's really going on in the world
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so it's thrilling early morning calls
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late night calls and the like it's
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thrilling well you start out in the
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morning with Europe and of course you
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end the day with Asia yeah it's a fun
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life I can see that and that's how they
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start their day no that's now do you
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also see midst this model um areas of
00:11:01
specialization developing so do certain
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centers in different parts of the world
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for instance focus on an area perhaps by
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virtue of the skills that they have or
00:11:08
even the immediate requirements or needs
00:11:11
or are these all generic centers that
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are emerging in Sap's case or even more
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generally I think it's um it's a balance
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um there may be a specific area of
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expertise or a functionality that you're
00:11:23
focusing on and you might decide a
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certain part of the world has the
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knowled workers that immediately could
00:11:31
resource that and get it done so in that
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in that context you might choose
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something
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geographically but more or less
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horizontal service around the world is
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the is the concept that we look at and
00:11:45
if you look at the jobs that we've
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created in development for example over
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these last several years the jobs in
00:11:51
Europe have actually stayed pretty
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steady or pretty flat and they've
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expanded
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dramatically um in parts of Eastern
00:11:58
Europe but in particular in India and
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China mhm I asked that in part because
00:12:03
IBM Microsoft Cisco you know peers in
00:12:07
terms of the stature in their various
00:12:09
segments as well appears to you um they
00:12:12
are setting up centers around the world
00:12:14
as well and and it seems to me that
00:12:16
they're trying to focus their energies
00:12:18
from the beginning on particular needs
00:12:20
so they're saying that okay initially
00:12:21
we'll do
00:12:22
development um which is for the local
00:12:25
markets and then we'll expand that
00:12:27
perhaps there are certain effic gencies
00:12:29
or cost requirements that they can meet
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but they're not only intending the
00:12:32
output to be limited to of say a
00:12:34
technology to that local market but
00:12:36
something that can be used but just new
00:12:38
areas of innovation they wouldn't
00:12:39
otherwise be typically thinking about in
00:12:41
a San Jose or a Redmond or an arm is
00:12:45
this kind of how you think about this as
00:12:46
well or or is it different do you really
00:12:48
mean um you want all types of skill sets
00:12:52
represented at each Center no I think we
00:12:54
think about it similar to some of the
00:12:56
big names that you just mentioned um for
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example if you're innovating in a
00:13:01
certain area and you have to staff
00:13:03
something up quite quickly um You Want
00:13:06
To Source New Pools of talent and
00:13:08
clearly that's an opportunity to do that
00:13:11
you may also look for pools of talent to
00:13:13
better support existing customers in
00:13:16
some cases even back office functions in
00:13:18
a more economical and productive way um
00:13:21
clearly when it comes to thought
00:13:23
leadership when it comes to the
00:13:25
economics of serving an existing
00:13:27
customer base that is real Innovation
00:13:30
going on in places like India today you
00:13:32
have an interesting dual role because
00:13:34
you're of course head here of the US
00:13:35
operations at the same time you're in
00:13:37
the overall uh executive board as well
00:13:39
so you do have to keep the perspective
00:13:41
of how the operations around the world
00:13:43
function in uh concert with what you
00:13:45
have set up here so I think that gives
00:13:47
you the perspective at both the local
00:13:49
level as well as the global level it's
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true but we've always thought globally
00:13:53
um even six five six years ago we were
00:13:56
Outsourcing a lot of work and and a lot
00:13:59
of knowledge work important work some of
00:14:01
it that we brought back to the United
00:14:03
States um in Far Away places like India
00:14:05
and even China so it's always been in
00:14:08
our thinking to be Global we've also
00:14:10
done this in places like Brazil where we
00:14:13
set up certain um customer support
00:14:15
centers and localization centers one of
00:14:17
the really important things that you
00:14:19
need to do well in large Enterprise
00:14:21
software is make sure you're localizing
00:14:23
the product and the application to the
00:14:26
customer ultimately that's going to use
00:14:28
it m um a lot of folks don't realize
00:14:30
this but in Far Away places from the
00:14:32
United States most of the largest
00:14:35
competitors are local competitors
00:14:37
they're not big well-known brands in the
00:14:39
US so having that Savvy around what's
00:14:42
really going on in local markets is key
00:14:44
to us and I think the nature of the
00:14:45
firms so for example you know here
00:14:47
you're probably used to the largest of
00:14:49
customers if you go to a lot of Emerging
00:14:51
Markets you have a lot of the small and
00:14:52
mediumsized Enterprises who can't always
00:14:55
hire so many consultants to be able to
00:14:57
implement these Solutions so they need
00:14:59
an approach um that will also work for
00:15:02
them give them the effectiveness they
00:15:03
need um while at the same time being
00:15:05
cost efficient as well you're absolutely
00:15:07
right and some of the best business
00:15:09
practices that we have now for small and
00:15:12
midsize customers actually came from our
00:15:14
asia-pacific operation because the
00:15:17
notion of prepackaged industry specific
00:15:20
ready to run applications with a fast
00:15:23
time to Value fuse actually came from
00:15:26
emerging markets and then we brought
00:15:28
those ideas and syndicated them in
00:15:30
places like the US where you could
00:15:32
better serve the small midsize customer
00:15:35
over here so Innovation it's fascinating
00:15:38
because it comes from every part of the
00:15:39
world the the big idea is best ideas
00:15:44
exist somewhere in the world at all
00:15:46
times the art form is aggregating them
00:15:49
and scaling them across the world at all
00:15:51
times yeah no I think that's a wonderful
00:15:53
way of putting it because earlier there
00:15:54
was more of a model where there's some
00:15:57
sort of headquarters or Center and
00:15:59
everything else is distributed and
00:16:00
adapted locally rather than ideas coming
00:16:04
from local places and because there are
00:16:07
certain needs or pressures that are
00:16:09
being faced and then they can be
00:16:10
aggregated and scaled in some way and
00:16:11
adapted to also be used in other markets
00:16:13
also I I agree totally and also the
00:16:16
talent if you have great talent and a
00:16:18
best business practice for example with
00:16:21
large Enterprise that works beautifully
00:16:23
in the US it will work in Japan yeah it
00:16:26
will work in India it will work in China
00:16:28
yeah so don't hesitate to
00:16:31
cross-pollinate those Business Leaders
00:16:33
and move them let them get crossborder
00:16:37
experiences let them adapt to new
00:16:38
cultures and new languages and new ways
00:16:40
of doing things they become fantastic
00:16:42
Executives then when they come back to
00:16:45
the United States as an example or
00:16:47
Europe they bring Rich experience and
00:16:50
when you see a person that's done that
00:16:52
if they left on in the Year 2005 and
00:16:55
they came back in the year 2008 you can
00:16:57
hardly recognize
00:16:59
right they're so polished they're so
00:17:01
much more complete they think so much
00:17:03
bigger and so much more globally so
00:17:05
we've gotten pretty good at moving
00:17:07
people to new locations and letting them
00:17:09
innovate and grow that's a key mechanism
00:17:11
I mean since we're on the topic of
00:17:12
strategy you let me ask you about Sap's
00:17:15
growth strategy I mean there are some
00:17:17
interesting um models which are in your
00:17:20
industry you know you have on the one
00:17:22
hand an oracle which has been
00:17:24
aggressively pursuing the acquisition
00:17:26
based path you on the other hand have
00:17:28
been more conservative and have filled
00:17:31
gaps but mainly pursued an organic
00:17:33
growth strategy and I think a few years
00:17:35
ago it was uh it was even more
00:17:37
interesting because you people had said
00:17:39
oh all these Oracle Acquisitions
00:17:41
building an integrated platform out of a
00:17:44
seble and PeopleSoft and JD Edwards and
00:17:46
so forth is going to be a very very
00:17:47
challenging task but they also seem to
00:17:50
be making some good progress from what
00:17:51
one hears it quite hasn't been the the
00:17:54
uh disaster that some people had
00:17:57
predicted but where do you view this and
00:17:59
and uh going and how do you view your
00:18:01
strategy in that context well the one
00:18:03
number one competitive Advantage for sap
00:18:06
over um a company like Oracle is
00:18:10
integration we design the application
00:18:13
from the ground up to be integrated
00:18:16
across business processes end to end and
00:18:19
we do that in 26 distinctly different
00:18:21
Industries so for example if you're in
00:18:24
the consumer products business and you
00:18:26
want to implement in order to cash
00:18:28
business process you know that sap
00:18:31
designed that with Engineering in mind
00:18:33
from end to end and it's ready to run
00:18:35
out of the box sadly for companies like
00:18:38
Oracle they have to interface things and
00:18:42
deal with very complex implementations
00:18:44
because none of that has been engineered
00:18:46
by Design and there may be different
00:18:48
pieces of different Acquisitions all in
00:18:51
the same solution and customers really
00:18:53
have to navigate through that it's very
00:18:55
costly to do that for the customer it's
00:18:57
very risky to do that for the customer
00:18:59
and I think that's why Oracle continues
00:19:01
to lose market share as it relates to an
00:19:04
sap it's difficult to create that
00:19:06
Universal platform which will bring all
00:19:08
these pieces together I mean not
00:19:09
everything's so modular that you can
00:19:11
just plug these pieces uh and and move
00:19:14
forward so you seem fairly confident
00:19:15
about the strategy of sap going forward
00:19:17
and where are you headed next well don't
00:19:19
forget or Oracle as an example has
00:19:22
acquired all their growth M
00:19:24
unfortunately for the customer none of
00:19:26
that has been integrated on a common
00:19:28
platform sap has acquired all of its
00:19:32
growth through an organic growth
00:19:33
strategy where are we going we're going
00:19:36
to continue to do what we've been doing
00:19:38
organically for 35 years as the market
00:19:40
leader two times larger than the number
00:19:43
two but we'll also do that now for small
00:19:46
and mid siiz customers because there's a
00:19:49
lot of growth there we'll do that for
00:19:51
business users um as evidenced by the
00:19:54
business intelligence move and our
00:19:57
acquisition of business business objects
00:19:59
because it really helps the sea level
00:20:01
decision makers close that strategy to
00:20:03
execution Loop we talked about earlier
00:20:05
so think of us as a company that's going
00:20:07
to lead in small mid and large companies
00:20:10
as their platform their standard
00:20:11
platform of choice in 26 Industries
00:20:14
think of us as expanding with small and
00:20:16
midsize clients all around the world and
00:20:19
think of us as the company that appeals
00:20:21
to that business user within an
00:20:23
Enterprise with new and innovative
00:20:25
solutions such as business objects yeah
00:20:28
sounds like a fascinating road ahead and
00:20:31
wish you the best of luck as you pursue
00:20:32
those Endeavors greatly appreciate your
00:20:35
uh questions today and thanks very much
00:20:37
for enj the
00:20:39
conversation for more information please
00:20:42
visit knowledge. won. up.edu
00:20:46
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