Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Seven More Questions for SAP’s Co-CEO Bill McDermott

The last time we heard from SAP co-CEO Bill McDermott, he talked a great deal about a then-upcoming product strategy called HANA. The idea was to move all of SAP’s existing business applications into a high-performance appliance, where the database runs in memory, and is more responsive to requests.

In the 15 months since that conversation, SAP has been on the move. HANA is not only done, but all of SAP’s primary applications are running on it. SAP has pivoted from running all of its applications in an old-school on-premise fashion to offering them both in the cloud and on premises, or on a mixed hybrid-cloud basis.

It also made a significant acquisition of SuccessFactors, the cloud-based human capital management (HCM) company. SuccessFactors is now a significant business unit within SAP, and includes all of its previous HCM software assets, and it competes with that market’s fast-moving cloud player, Workday.

Last week, SAP hosted a global launch event to announce that the three-year effort to convert its entire suite of business applications to the cloud — and to the HANA architecture — was complete. It also provided me an opportunity to catch up with McDermott in New York. Here’s a sample of our conversation:

AllThingsD: Bill, the last time we talked about HANA, you hadn’t quite moved all your primary applications over to it. It’s not exactly a huge piece of your business yet, but let’s start there. How is HANA coming along?

McDermott: We have 1,000 customers on it now, so it’s growing really fast. The last update we gave, we indicated that we think it could be a half-billion U.S.-dollar business, which would make it the fastest-growing software product in the history of the world. So it’s big.

The last time we talked, you hadn’t quite moved all your applications over to HANA. The big one that was missing was the Enterprise Resource Planning piece. Can I assume that part of the news today is about that process being completed?

That’s exactly it. The big news today is about the whole SAP suite being moved over to HANA. All the things that the business suite does — how you manage your supply chain and manfacture your products and get them to market, how you manage your people, how you manage your customer relationships, everything around you in that whole end-to-end value chain — runs in what we call the business suite. And we go to market with that suite in 24 industries, small, medium and large, all over the world. Now that whole suite runs on HANA.

For the benefit of people who struggle with the idea of what the software actually does, can you give me a good example of who uses it, and how?

We work with this company HSE24, it’s like a QVC in Europe. They are selling product on television, there’s a meter at the lower right-hand corner of the screen telling you how many of that item are left. That’s run on SAP software. When you call in to the call center, they already know from the sensors on the social networks, via HANA, what you’re likely to want. And then they can also do the upsell and the cross-sell. One of the customers that is going to be featured today is John Deere. We’ll talk about how they can, based on usage history and patterns, provide preventative maintenance on the things that will need it the most.

There’s obviously more to it than simply running existing processes faster and cheaper and more efficiently, right?

The wild part about all this is sort of like this: No one could have predicted that Disney would become the Disney we know today when Walt drew a picture of a mouse. What you have is the limitless potential. CEOs have the ability to rethink business models, based on having the speed and the insight and the simplicity to truly change how they run their companies and transform industries. You and I fly too much, and sometimes flights get canceled. It happens. If I have to get out of Moscow and get back to New York, the airline can charge me more. If my original flight is canceled, and I’m on the line with three other people, you can get more money out of me. Dynamic real-time pricing can transform the airline industry.

Is this all the result of intelligence you’ve brought from the applications themselves, that are getting a new benefit from being run in-memory on HANA?

There are two ways to look at it. The in-memory architecture makes it fast, and simplifies it. The application makes it so smart. You’re combining transactions and analytics. And you’re also doing things we like to call “extreme applications.” You may be a big consumer products company, and you have trade promotions that go to different stores in different geographies. If you ask them how it’s going at a particular store in Brazil, they will have a hard time answering unless they’re using HANA, because it captures all the transaction data. They know exactly who’s buying what, and using which promotion or deal.

Talk to me about the competitive landscape. Oracle CEO Larry Ellison loves to lob verbal grenades at you from time to time. Care to lob one back?

In the old days, the answer would have been yes. What’s happened is that we take it a compliment when people try to spread fear, uncertainty and doubt. It’s a sign they’re worried. But they don’t have to be, because we’re open, and our most important mission is to make customers happy and fulfill their ambitions. We’re fully cooperative with Oracle, with IBM and with Microsoft. So, anything that a customer chooses to do with one of them, they can continue to do it, and we are highly supportive of that.

Obviously, SAP’s applications can now run optionally in the cloud or in a mixed environment. But the pure-play cloud companies like and Workday are certainly showing some strength. What sort of competitive threat are you seeing from them?

I think SAP has responded in the cloud. SAP Cloud will take care of your customers on-premise or on-demand. We announced SAP Customer 360, and it runs on HANA. So it’s real-time, it’s predictive, and it’s in memory. If you want to buy it on a public cloud on a subscription basis like Salesforce, we now have it. Once people realize it’s running on HANA, we’re going to have an advantage. Salesforce has done a good job of building a large cloud company, but they have done it on an old architecture. You can’t do real-time analytics on the platform. That’s a big Achilles’ heel. On talent, Workday is a good company, they built a good HCM solution. We bought SuccessFactors, and then we took all the assets of SAP’s existing HCM application and put them under SuccessFactors. So now, as it relates to people, wait until you see, in June, the list of companies who are running SuccessFactors. Workday had a great opportunity to go in where there was no competition, and we didn’t have a response. We had HCM, but it was all on-premise. The market wanted talent in the cloud. Now they are going against us, and there’s a lot of competition.

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