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SAP America chief offers turnaround strategy

The company's newly elected CEO says he is orchestrating a plan for the software behemoth to lift sagging sales and boost employee retention.

LAS VEGAS--SAP America's newly elected chief executive is orchestrating a turnaround plan for the software behemoth to lift sagging sales and boost employee retention.

CEO Wolfgang Kemna said part of the plan involves a company "adjustment" aimed at revamping some business units, which would bring sales forces and top-level executives closer to the customer. He emphasized that the adjustment plan will not result in job cuts.

"I'm focusing on the SAP America situation and the colleagues," Kemna said in an interview during SAP's annual trade show here. "The retention issue is on the top of my list of priorities."

In recent months, the company has seen a string of top-level executives, including chief financial officer John Milana and former president Jeremy Coote, leave the company, primarily to work for dot-com start-ups or SAP's competitors.

In April, Kemna replaced former chief executive Kevin McKay, who resigned the day SAP posted shrinking profits in what executives described as a "challenging" quarter. Software license sales grew just 4 percent as business costs rose and competition in the market increased.

The exiting executives left for Net companies offering employees hefty stock-option packages. SAP responded by offering its top executives similar deals. The new plan, which was approved in January, consists of stock options and convertible bonds that are competitive in the U.S. marketplace and comply with German legislation on corporate regulatory issues.

Some analysts have said that McKay, whose roots lie in accounting, was not the leader SAP needed to jump-start its ranks. Kemna, known for his ability to communicate, might be just the right man to pull SAP America out of its recent slump, they say.

"At this juncture in SAP America's history, SAP needs a strong sales type and outward-facing person that understands the competitive marketplace," AMR Research analyst David Boulanger said in a recent interview. "A lot of folks at SAP looked at (McKay) as a great inside person but not the outward-facing CEO that SAP (America) needs at this time."

Kemna was managing director at SAP's German subsidiary, where he was responsible for sales and marketing efforts and was a member of the company's extended management board.

"He's young, he's been involved with a number of operations, and he really brings an international perspective to SAP America," Boulanger said. "He brings an enthusiasm."

But the well-liked, charismatic chief still faces a tough road, said Joshua Greenbaum, an industry analyst who heads Enterprise Application Consulting in Berkeley, Calif.

"They've got to really change how the company does business in the United States," Greenbaum said. "They had trouble closing deals, they had trouble with the organization. His top priorities are to maintain momentum in sales and make sure this company is really as lean and mean as it can be."

There has already been a change, Kemna said.

"Colleagues have told me something has changed--that we've turned the boat and we're making the transition," he said. "The transition is huge, but we're making it."