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Monday, March 31, 2008 10:44 AM/EST

SAP: Lawsuits and Executive Shuffles. Oh My

There appears to be lots happening behind the scenes at SAP. The company, embroiled in a lawsuit with Oracle over improper use of support data through its TomorrowNow subsidiary, is being sued again - this time over an allegedly failed software implementation. And it's all coming down in the midst of potential internal changes in the company's leadership.

On March 20 Waste Management Inc. (a company that does what its name implies) filed suit against SAP with claims of fraud. The company said that it spent $100 million implementing SAP's software to run its business out-of-the-box - in other words, without any customizations - and the software was a "complete failure," according to media reports. The company is seeking expenses plus additional damages.

Oracle's suit against SAP, if you recall, has to do with the fact that TomorrowNow downloaded information from Oracle's support Web site that it did not legally have access to (TomorrowNow provides third-party support for Oracle applications; customers and their representatives have access to some support documentation through license agreements). While SAP has tried to brush aside Oracle's complaints - saying that while TomorrowNow did in fact improperly download data, SAP itself had no knowledge of the data - Oracle says it has even more damning evidence that points to years of what amounts to corporate espionage.

The judge in the case ordered mediation between the two parties and the next case management conference is scheduled for April 24. Barring any settlement that might come out of mediation, a trial date is set for sometime in 2009. Between Oracle's blustering and SAP's admission of "some" guilt on TomorrowNow's behalf, it's hard to guess where this case will land.

Internally SAP seems to be seeing some upheaval as well - though company officials have declined to comment. According to media reports, SAP's supervisory board is looking to make Deputy Chief Executive Officer Leo Apotheker co-CEO, on equal standing with CEO Henning Kagermann. The move could happen as early as April 2.

According to a Bloomberg article (which cited another article that cited company sources) SAP's works council - an employee-represented group that takes the place of a worker union - is concerned that if Apotheker is appointed to the co-CEO role and he decides to keep his office in Paris - Apotheker is reportedly not fond of Walldorf, where SAP's headquarters are - then Walldorf may lose importance in the overall scheme of things.

To me, the much bigger concern - or question, really - is why the move to a dual CEO role, if indeed the move comes to pass? My guess is it's likely because Kagermann's contract expires in 2009 - he extended it last year amid SAP's plans to launch its Business ByDesign suite. If he does choses to leave, Apotheker will already be in place to assure a smooth leadership transition.

But the dual CEO strategy has backfired in the past.

The last time SAP tried to move to dual CEOs it lost a major player (and customer confidant), Shai Agassi. Sometime around early 2007 - or before, who really knows when these conversations start - SAP founder Hasso Plattner suggested internally that SAP move to a dual CEO role to be shared between Agassi, then president of the Product and Technology Group, and Apotheker, then president of SAP's Global Customer Solutions & Operations. In the meanwhile, Kagermann extended his contract as CEO. Agassi, a fast-rising star at SAP, took the whole thing as any control freak would: a slap down. Agassi resigned his post in March, Apotheker became Deputy CEO and Kagermann maintained his position as CEO.

I don't believe that there would be a similar skirmish between Apotheker and Kagermann who already as deputy CEO and CEO likely share some responsibilities. The move would, rather, point to a much smoother transition this time next year should Kagarmann decide not to renew his contract - or be forced out on the company's bylaws that anyone over 60 has his (or maybe some day her) contract renewed annually.

Now if SAP could just rid itself of those pesky lawsuits.

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