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It appears that the game-changing shift toward software as a service (SaaS)
and cloud computing business models claimed a high-profile victim on Monday. SAP’s
CEO Leo Apothekar resigned from his post,
weighed down by the enterprise software company’s annual financial loss and the
failure to deliver an online version of its business software ahead of

Apothekar’s resignation is effective immediately. Going forward, SAP
will operate under a co-CEO structure in
which Bill McDermott, longtime head of SAP’s
field organization, and Jim Hagemann Snabe, head of product development, will
share leadership duties.

“The new setup of the SAP Executive Board
will allow SAP to better align product
innovation with customer needs. The new leadership team will continue to drive
forward SAP’s strategy and focus on
profitable growth, and will deliver its innovations in 2010 to expand SAP’s
leadership of the business software market,” said Hasso Plattner, co-founder of
SAP and chairman of the SAP
Supervisory Board.

Though not the only reason for the executive shakeup, SAP’s
lack of a coherent cloud strategy has not helped the company move forward.
Ironically, SAP had early ambitions for
online software. The company originally introduced an online version of its business
software, dubbed Business ByDesign, in limited distribution way back in late
2007. Architectural issues rendered it poorly received, however, and based on
early customer reviews, SAP pulled Business
ByDesign back in-house to redesign and incorporate more support for newer
technologies such as virtualization. The suite of services, which includes CRM,
supply chain, BI and analytics, has been a work in progress ever since.
Finally, late last year, the company put a pilot version of the SaaS suite,
which is sold by partners on a subscription basis, into the hands of a limited
number of channel partners.

A general release is rumored to be coming toward the end of this year, but SAP
is already being lapped by upstart SaaS players such as NetSuite, as well as
fellow legacy on-premises software vendors such as Microsoft.

And yet, despite SAP’s struggles, the
company still holds the overwhelming market lead for enterprise applications,
according to industry analysts. The challenge, however, lies in becoming more
digestible for SMB customers
that the channel largely services today.

“For all the hype around cloud and SaaS, [these models] still represent a tiny
percentage of the enterprise apps market,” said Jim Shepherd, vice president
and Gartner fellow. “Bill [McDermott] doesn’t need to ‘right the ship,’ but he
does need to re-energize a sales force and channel that is somewhat demoralized
after 15 months of frozen IT budgets.  I also think they need to simplify
the packaging and pricing—they still make it too hard to buy.”

In addition to the changes at the CEO
position, SAP named CTO
Vishal Sikka to the SAP Executive Board.