SAP faces turning point as Hasso Plattner steps down

It’s difficult to imagine SAP without Hasso Plattner, who’s been there from the beginning and has significantly shaped the fortunes of Europe’s largest software manufacturer for more than five decades as founder, board of directors member, and, most recently, as chairman of the supervisory board. Now at 80, Plattner is giving up his post at the head of the supervisory board and leaving the SAP stage.

In April 1972 five former IBM employees founded Systemanalyse und Programmentwicklung GbR, which later became SAP, in Weinheim. From the very beginning, the key design principle at SAP has been the integration of individual components where users could perform tasks. In the first few years, they programmed modules for financial accounting, purchasing, inventory management, order receipt, material planning, and invoicing and auditing. The concept of an integrated system in combination with increasingly powerful computer architectures from IBM and Siemens meant a revolution in the early days.

It was the starting point of an unparalleled success story that has remained closely linked over the decades with the original founders, mostly Dietmar Hopp and Hasso Plattner. While IT startups today are inflated by investors with billions of dollars and under enormous pressure, things were more leisurely at SAP in the beginning. “We were very lucky and in the right place at the right time,” Hopp said in a 2015 interview with NWZ. “Our startup phase lasted about 10 to 15 years.”

After the IPO in 1988, Hopp and Plattner shared power at SAP by mutual agreement. Hopp took over the position of CEO until 1998 and Plattner took care of technology and development, as well as SAP’s important entry into the US market. “The period between 1988 and 1992 was wonderful,” Plattner said in an interview with the Smithsonian Awards Program’s Oral History Project. “I spent every day developing software. It was a great time.”

But it hasn’t always been smooth sailing.

When it came to other personnel decisions, in which Plattner had a say, the company didn’t always have good luck with successive leadership and increases in maintenance fees, which battered customer relationship for years, so SAP had to revise its pricing policy.

Then CEO Bill McDermott surprisingly resigned at the end of 2019 to go to ServiceNow, and the dual leadership of Christian Klein and Jennifer Morgan only worked for a short time.

Despite the criticism, Plattner’s influence on SAP strategy can’t be overstated as he was the driving force behind R/3 development in the early 1990s, and in 2010, his pet project, the in-memory database HANA, had major market presence. And the technology formed the basis for the new ERP product generation S/4HANA, launched in 2015.

Throughout the many changes, however, Plattner and the entire supervisory board repeatedly backed management. “Without this support, we wouldn’t have been able to carry out the strategy changes three years ago, especially with the knowledge of the risk of the share price falling by 30%,” said Klein, who reiterated that changes at SAP will continue.

Best laid succession plans

Amid backlash from the sluggish succession process, Plattner was reconfirmed in his office for two more years in 2022. “Putting my position as chairman of the supervisory board in the right hands is a very important and emotional task for me, which I’ve been working on for some time,” Plattner said at the SAP Annual General Meeting in May 2022.

Then in 2023, there was movement among the supervisory board to bring in Punit Renjen, former Deloitte CEO, whom they believed would a suitable fit to replace Plattner. “This will initiate a structured transition at the top of the supervisory board, which will ensure the necessary continuity for the further growth of our company,” Plattner said.

But three months before Renjen was supposed to start, he backed out, a mutual decision, SAP said in a statement, and then found former Nokia boss, Pekka Ala-Pietilä to fill the spot.

“In Pekka Ala-Pietilä, we’ve found a leader who not only brings a deep understanding of our industry and the complexity of European SE governance, but has also been an important ally in many of SAP’s key moments,” Plattner said. “With his election, I’m confident SAP’s supervisory board is in the best hands.”

Yet the fact remains that SAP is undergoing the most fundamental strategic change in its history. And SAP’s clientele is a sluggish mass, so getting them going isn’t easy. Migration to the new product generation was difficult to get off the ground. But for Plattner, hesitation is incomprehensible.

“I’m sad we’re still confronted with the same questions and concerns after the great sales success, the implementations completed in record time, and the satisfied productive customers,” Plattner wrote in a guest article for Computerwoche in 2015 — a sentiment that’s still relevant today. Above all, the question of business value continues to drive user companies in times of tight IT budgets.

A question of cloud

While SAP founders mastered the major turning points in the past millennium, especially from the mainframe to the client-server era, the company, including Plattner, was surprised by the dynamics of the cloud. SAP doesn’t want to make the same mistake when it comes to AI. SAP cooperates with providers of LLMs and has launched its own AI bot, Joule. But in order to benefit from new AI technologies, customers will have to switch to S/4HANA and move to the cloud.

In addition to the transformation on the customer side, SAP itself is also changing. Earlier this year, Klein announced a comprehensive restructuring program to direct the group more toward cloud and AI, which Plattner backs. After the difficult decisions in 2020 to focus entirely on the cloud business, the development of AI application scenarios requires a further shift of resources and restructuring, Plattner wrote in his last letter for the 2024 AGM. “But SAP needs to evolve and make the necessary changes to ensure the long-term success of the company for all its stakeholders,” he added. “The board of management has made these decisions in consultation with the supervisory board and we fully support this strategy.”

What comes next

In recent years, Plattner isn’t seen much in Germany, yet users still pay tribute. “Hasso Plattner has created a remarkable life’s work over the past 50 years,” German SAP user group DSAG wrote. “For this, he deserves the heartfelt respect and recognition of all 3,800 customer companies we represent in Germany, Austria, and Switzerland. DSAG would like to thank Plattner for his tireless work, which has made SAP a world-class software company.”

But Plattner will still have a presence, continuing to work as a patron and benefactor. In 1998, he founded and financed the Hasso Plattner Institute for Software Systems Engineering in Potsdam, thus becoming a main private sponsor of science in Germany. He also helped renovate several buildings there and financed the reconstruction of the Palazzo Barberini, one of the most visited museums in Germany. He’s also involved in the education and cultural sector, founding the Hasso Plattner Foundation in 2015, and promoting charitable healthcare and health education causes in South Africa.

“What if I were ever asked why I didn’t do anything?” he recently pondered during an interview with Computerwoche. “I don’t want to say it was too risky or too difficult for me. These are not good answers.”