Power CEO

SAP's Hungry Titan

Bill McDermott by Mark Muehlhaus attenzione
Yes, I made it! Bill McDermott heads SAP.
  • Why it matters

    Why it matters

    Bill McDermott is set to achieve what his predecessor could not, namely, integrating cloud technology into SAP, attracting back employees and boosting revenues.

  • Facts

    Facts

    • SAP is the world’s largest maker of business management software; Oracle is a close rival.
    • The firm has sales of €17.6 billion and employs almost 70,000 people globally.
    • Mr. McDermott joined the company in 2002 and has been the sole CEO since mid-2014.
  • Audio

    Audio

  • Pdf

It is early morning in cold and gray Berlin, and about 30 design students at the University of the Arts fight their fatigue with coffee. Finally, around 9ish, Bill McDermott, chief executive of German software company SAP, strides into the room, wearing a dark blue suit and no tie.

He stops by one student’s project for a moment. “Do you already know where you’ll go after graduating?” Mr. McDermott asks the obviously flattered student. Was that a job offer?

Airs and graces are foreign to the 50-something who has been running SAP by himself since mid-2014. He is responsible for €17 billion ($19 billion) turnover per year and almost 70,000 employees worldwide.

“If people today say that I can’t do something, that’s when I really start fighting.”

Bill McDermott

In 2003, when he was leading SAP’s North American operations, he announced his plans to increase SAP’s U.S. turnover by 50 percent to $3 billion within just three years. It was 10 times the normal yearly growth. Three years later, he reported sales of $3.2 billion – $200 million more than targeted.

Since becoming SAP co-chief executive in 2010, Mr. McDermott has pushed SAP to expand operations in cloud computing as companies and consumers increasingly turn to real-time, Internet-based software. The world’s largest maker of business software, which originally designed, installed and maintained its own complex computing systems, has announced more than $20 billion worth of takeovers to gain market share in cloud computing and compete with rivals, including Oracle, Amazon and IBM.

SAP’s move into cloud services won’t be effortless. It is already affecting its 2017 profit outlook. The revised expectations, announced Tuesday, are for sales of €21-€22 billion ($24.3-$25.5 billion) in 2017 and an operating profit of €6.3-€7.0 billion in two years time, compared with previous estimates of €7.7 billion profit on sales of €22 billion.

“When you think about our company, it is easy to fall into a trap of thinking about margin rates. We’re in a market share game,” McDermott was quoted as saying by news agency Bloomberg on a conference call on Tuesday. “Anybody can harvest a margin rate in the short term. Unfortunately they won’t be running a very interesting business two years from now.”

The company said it expected cloud subscription sales and support to overtake traditional software license sales by 2018.

024-SAP-CEO-Bill-McDermott WTB excludes 2013 reference

 

Confident, bullish, and hell-bent on winning, Mr. McDermott has lost none of the characteristic drive that has marked his rise from humble beginnings to one of the most admired CEOs in the world.

His is the classic rags-to-riches story that one hears less and less about in the United States today. He makes no attempt to hide his upbringing. He wants to be a role model for the younger generation.

Born in 1961 in Flushing, New York, Mr. McDermott grew up in a poor working household on Long Island. He learned to suffer the vagaries of fate early on, when, at just seven years old, he lost his younger brother to illness. Then the house his parents had long saved for burnt down.

What he heard as a six-year old would shape him forever. His primary school teacher, Sister Jean Agnes said to his father, “He’ll probably be a mechanic, or maybe a truck driver.”

He has been drawing motivation from that ever since. “If people today say that I can’t do something, that’s when I really start fighting.”

Young Bill McDermott realized early on that his parents lived in dire conditions because they lacked the education to make more of their lives. His mother stayed at home to look after the kids, and his father worked at New York utility ConEdison. The job was rough and paid little, and he had to moonlight to make a living.

In 1997, aged 36, he became the youngest ever member of Xerox's management board.

“Hard work doesn’t always pay off,” is the lesson Mr. McDermott took away, and resolved not to let it carry on for another generation.

Mr. McDermott was 22 years old when he completed his business studies and applied for a sales position with Xerox. When asked about his goals, he replied: “I want to be the CEO one day.”

With a big ego and ambitious goals, Mr. McDermott started work at Xerox. He became a stellar salesperson and rose quickly through the ranks. In 1997, aged 36, he became the youngest ever member of the management board.

When the way to the top spot was blocked, he left the company after 17 years in 2000.

In 2002, he started working at SAP, first as head of U.S. operations, later as global sales chief and, from 2010, as co-CEO together with Jim Hagemann Snabe.

After 12 years with the software company, he became the sole CEO in summer 2014.

But the journey is far from over. Mr. McDermott knows that many employees, especially those at the headquarters in Walldorf, Germany, have not really accepted him yet. He has spent more time in Germany since becoming head of the company. “I want to include my employees and discuss things with them as often as possible,” said Mr. McDermott.

“Run simple” is the motto he is trying to implement in the company. To achieve the shift to cloud computing, SAP software packages as well as processes within the firm need to be easier, faster and more flexible. That’s not an easy task for a heavyweight like SAP with its more than 100,000 clients and almost 70,000 employees across the globe.

For Mr. McDermott that is a situation he has been familiar with for more than four decades. He has experience of lagging behind – in this case, SAP lags behind U.S. cloud specialist Salesforce – and has to give his all to catch up and overtake.

Skepticism and self-doubt are foreign to him. “I am more humble today,” he said “but at the same time I’m hungrier than ever before.”

 


Video: Bill McDermott on why he wrote a book.

 

This is an abridged version of an article that first appeared in WirtschaftsWoche magazine. To contact the author: michael.kroker@wiwo.de.

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