On Feb. 7, Deepak Chopra showed up at the Silicon Valley offices of German software giant SAP (SAP), causing quite a stir. Hundreds of people packed SAP’s cafeteria and an overflow room to listen to the New Age guru. Chopra, wearing a black suit with red sneakers, advised workers to sleep more, eat right, and meditate on their place in the world. And, if anyone needed help, Chopra recommended his line of consciousness-altering Dream Weaver glasses. “I got the idea for these during my first LSD experience at the age of 17,” Chopra told the SAP employees.
This is not your typical SAP event. The company is known as a very important—yet very sedate—producer of software that helps its 230,000 customers manage operations, including inventory, payroll, and finance. Over the years, its complex applications have earned the unfavorable reputation of being pricey and taking months to install. “People haven’t seen them as being all that innovative,” says China Martens, an analyst with Forrester Research (FORR).
The man in charge of changing that is Vishal Sikka. He brought in Chopra—“Deepak challenges us to think about the bigger questions,” he says—and has pushed SAP to launch a superfast database that he thinks will be the big driver of the company’s growth. Officially, Sikka is the company’s technology chief and a member of SAP’s executive board. Unofficially, he’s BFF to SAP co-founder and Chairman Hasso Plattner, who’s instructed Sikka to shake up the company.
SAP went through a period of deep self-reflection in early 2009, says Sikka, a 10-year veteran of the company. SAP had endured one of the most tumultuous periods in its 40-year history after customers revolted against a hike in annual fees. Raising prices on its most loyal customers in the midst of the global recession exacerbated SAP’s reputation as an out-of-touch laggard. What’s more, a series of product delays left SAP late to the cloud computing era. During a heated discussion between Plattner and Sikka at a Japanese restaurant in Aspen, Plattner banged his fist on the table and urged Sikka to do something about the problems.
Sikka decided to create small, fast-moving teams staffed with some of SAP’s brightest engineers. He put them in startup-like offices around the world with open floor plans and Ikea furniture, far away from the company’s main campuses. The goal was for SAP to learn how to go from a product idea to a usable application in 90 days—a shocker of a timetable for a company used to taking years between upgrades.
In the subsequent months, SAP engineers have pumped out dozens of new applications, many for smartphones and tablets. SAP’s software is even touching consumers for the first time. A team in Shanghai, for example, came up with a mobile app that encourages people to take photos of their favorite clothes and share them with others. Friends can vote on which clothes they like best. SAP’s retail and clothing customers then use those results to see what brands and styles are hot in China.
But the most dramatic change ushered in by Sikka is Hana, a new type of database software SAP released in June 2011. Typically, SAP has competed in the business applications portion of the software market, leaving databases and hard-core analytics to other companies such as Oracle (ORCL) and IBM (IBM). Hana, though, is a so-called in-memory database that’s turned SAP into a serious data-crunching contender. Instead of keeping a company’s prized data—be it sales numbers, inventory, or customer information—on a slow, spinning hard disk, Hana stores data on high-speed memory chips. This approach costs a bit more, but the result is a system that can sort through huge volumes of data in seconds rather than hours.
Kingfisher (KGF), the European home improvement retailer, has turned to Hana to help keep track of sales data and inventory for its stores scattered across eight countries. Instead of buying screwdrivers for its Russian and Polish stores from different suppliers, the goal is to use knowledge gained from having a single database of inventory to buy in bulk and command better prices from suppliers. Kingfisher can also crunch sales figures from all its stores much faster than previously. “We’re sorting through billions of records now in 4 to 5 seconds,” says Euan Sutherland, Kingfisher’s chief operating officer. “It would have taken us two weeks to a month before.”
Sutherland was apprehensive when Sikka pitched him on Hana. “We were in a very realistic place right from the start and wanted proof that they could do what they claimed,” Sutherland says. Sikka, as he often does, went with the soft-sell approach, pledging to have his engineering team aid Kingfisher, and even giving Sutherland his cell phone number. “Vishal is kind of a force of nature,” Sutherland says.
Last quarter, year-over-year sales of Hana software rose 100 percent to about $267 million, out of about $6.8 billion in total sales for SAP. About 180 customers have Hana projects up and running, and more than 1,000 have bought licenses to the software with the hopes of installing it soon, according to Sikka. Breaking with tradition, SAP is also letting customers rent Hana as a cloud service from Amazon.com (AMZN). When word of this broke inside SAP, some of Sikka’s colleagues sent him e-mails complaining that a low-cost version of Hana would undermine SAP’s model of selling multi-year licenses to software. “This is the kind of stuff we still have to deal with and fight internally,” Sikka says.
SAP tells clients that Hana is “possibly the fastest-growing business software product of all time,” yet there are plenty of skeptics who argue that the product is getting an undue amount of attention because it’s Plattner’s pet project, says Forrester Research’s Martens. Instead of trying to sell new customers on an unproven, newfangled technology, Martens says, SAP should spend more time taking care of existing customers. “The worry from the customers is that the software they are already using now is not that friendly,” she says.
The more potentially damaging critiques are that SAP is skewing the sales figures for Hana. SAP packages Hana in a bundle of software, discounting the price of the older applications, while charging a higher price for Hana. Customers may actually want the older apps, but it looks like they’re buying the bundle because of Hana. This doesn’t break any accounting rules, but it does muddy the waters, says Peter Goldmacher, an analyst with Cowen, a financial-services firm. “It’s also hard for me to find the customers and enthusiasm they are talking about,” says Goldmacher. “I am skeptical.”
Sikka is impervious to such criticism. A math savant who as a child in India used to memorize the speed, timetable, and routes of dozens of trains, Sikka maintains that Hana will be the main driver of SAP’s future growth. Over the past few months, he’s been working long days traveling the globe hawking Hana and his vision for a new SAP. Now and again, he finds a moment to relax by composing a poem or by doing breathing exercises. “I am lucky if I can do them for 10 minutes,” says Sikka, his already deep voice having dropped lower and turned nasal—the result of his fourth flu this winter. “Intellectual renewal is not easy.”
The bottom line: SAP has sold $267 million of its new superfast database software Hana, which it expects will drive future growth.
