SAP Turns Eyes to Sales, Profits with Executive Shuffle

The appointment of Leo Apotheker as SAP co-CEO signals a shift in the company's focus to boosting sales and profit margins.

The appointment of Leo Apotheker as co-CEO of SAP signals much more than the impending retirement of incumbent CEO Henning Kagermann in 2009.

It signals a sea change in the company's business plans as it shifts its effort from making huge investments in new software products and acquiring companies to reaping the highest possible profit margins from those investments.

SAP's executive shuffle itself comes as no surprise. It's been expected that Apotheker, who was appointed deputy CEO in March 2007, would take over sole possession of Kagermann's CEO role when his contract expires in 2009.

Read more here about SAP's move to co-CEOs.

It's also been expected that SAP would appoint several new executives to its Supervisory Board as the company changes its business focus.

But the appointment of Apotheker, whose roots run deep in sales and marketing, is perhaps the best indicator that the company is shifting its focus from software development to sales and customer service.

SAP, the world's largest business applications company by revenue, is well-known for its engineering expertise. The company was founded by five former IBM engineers; Kagermann received his doctorate in theoretical physics.

Apotheker, who holds a degree in international relations and economics rather than engineering, lives much more in the customer world. A member of SAP's Executive Board since 2002, Apotheker has since then been responsible for all of SAP's customer operations-consulting, education, training, sales, marketing, small and midsize business, and field services. Prior to that assignment he ran EMEA (Europe, Middle East and Africa) sales for SAP.

Given SAP's strategy to grow the company by revenue-versus chief rival Oracle's strategy to grow by profit through acquisition-Apotheker seems to be the best candidate for the top spot, analysts say.

"[SAP] is all about growing revenue. So in a sense having a guy who spent his life in a field organization makes a lot of sense," said AMR Research analyst Jim Shepherd. "I don't think this signals any kind of strategic shift. SAP handles these transitions better than anyone I've seen. They're very transparent. Can you imagine any other company having co-CEOs? They would tear each other apart. SAP will do this very elegantly."