Let's get ready to rumble

Memo from Hasso Plattner to Tom Siebel: Right back at ya, guy.

Three weeks after resigning as head of worldwide sales at Siebel Systems, Bill McDermott has resurfaced as the new chief executive and president of SAP America.

In snagging McDermott, SAP hopes the highly regarded executive will use his sales know-how and hefty Rolodex to revive its North American subsidiary. Just a few years ago, SAP America was the motor behind the German software company's growth. These days it is struggling and reported a 32 percent drop in software revenue during the second quarter.

Snagging McDermott is also sweet revenge for Plattner, the founder and co-chief executive of SAP. During the late 1990s, Siebel hired dozens of top SAP executives, including the then-CEO of SAP America. At one point, SAP even filed a lawsuit against Siebel, later dropped, alleging predatory hiring practices.

Prior to joining Siebel in 2001, McDermott, 41, served as president of analyst firm Gartner. The New York native also spent 17 years at Xerox.

McDermott spoke with CNET News.com about the front lines of battle in the struggling business applications market, his plans to compete against Siebel, and what it takes to succeed as chief of SAP America, a post that has turned into a revolving door at SAP.

Q: You're coming in at a particularly hard time. What can really be done in this economically stagnant environment?
A: People in my Rolodex have been calling me. They're saying, 'Congrats, and by the way, I didn't even know SAP did CRM (customer relationship management software).' There's really a pent up demand out there for a company that can sell a good business case. There are always investment dollars for a good business case. But not many companies are selling that. They're just asking for $10 million for their application. It's our job to make that business case good enough.

Shouldn't Siebel, SAP and others have seen this downturn coming? After all, you guys have all these sales pipeline and forecasting tools that are supposed to keep you attuned to what's happening in the market.

There are lots of companies that are tired of the pathological Silicon Valley story.

I think, in fairness to these companies, if you look at the pipeline for these types of applications, I think the pipeline is seriously good. But the economic environment has driven slippage and shrinkage in the size of the deals. People don't have the capital expenditure dollars they did. So these companies are executing against the same pipeline they used to execute against but getting different results because this is one of the toughest business environments people can remember.

Are you planning to make major organizational changes at SAP America?
So far I'm very impressed with the management team I've encountered. They have a track record of success. But we do have opportunities. We have an opportunity in the public sector business unit to bring in a new leader. We need a new leader in HR--that's an opening.

Will you be tapping your friends at Siebel to fill some of these spots?
Plenty of people would like to follow me here. I will have a discerning eye for who comes in the door at SAP. I want to make sure the value systems and competency of new people is in alignment with SAP's culture. Bringing in people from Siebel--that is not a lead strategy of mine.

Why did you leave Siebel? Didn't you see that company coming back soon?
Candidly, my rationale for leaving Siebel had to do with the integrity, corporate culture and the enterprise applications at SAP, rather than because things at Siebel were unworkable. I really thought SAP was the best company in the world for what I want to do.

What do you want to do?
I want to create the No. 1 applications company in North America. I want to create a business with enduring value that makes customers successful. That means building an organization with the best IT professionals in the world. It means building a company that is the growth engine and showcase for SAP, which ultimately means building the best business applications company in the world because business applications are defined by SAP.

What is Siebel's biggest challenge?
At the end of the day, customers are asking for enterprise applications. They are looking for a provider that is a trusted provider. They want a relationship that is true partnership. I think that's difficult when you only offer one slice of the pie.

SAP is again targeting midsized businesses as a market. Given that SAP has tried and failed multiple times in this market in North America, what will you do differently this time?
If the midmarket could have the best enterprise applications company serve their needs, why wouldn't they want that? So I want to really listen to the midmarket customer and shape our value proposition around that. I think we also need to create a tremendous awareness around our efforts to get the consideration of these companies.

Microsoft looks pretty serious about business applications. How do you view their entry into the market?

Candidly, my rationale for leaving Siebel had to do with the integrity, corporate culture and the enterprise applications at SAP.

Frankly, at this stage, I don't have a lot to say about that today. The only company that has proven enterprise applications is SAP. That has made our customers successful and has been a springboard for SAP from one applications market to the next.

So how are you going to whack Siebel?
That's the beauty of the SAP model. SAP is the only real e-business application solution provider in the market today. Companies like Siebel are disproportionately struggling with the macroeconomic environment because they're a one-trick company. We have many different solutions. We'll get our CRM business going, but that's just one piece of it.

What trends do you see emerging in the CRM market, besides companies buying less?
Customers are looking for a trusted advisor. They are skeptical of one-slice application providers. They are looking for an application suite. They are also looking for a relationship with a company and they want accountability in the relationship. People are looking for a company that has integrity and that they can trust and believe in. SAP has these attributes in disproportionate amounts in this market. I think people want what we have.

What are SAP's biggest challenges in North America?
We have had leadership challenges, so we need to establish myself as the leader. I'll also focus on the leadership team and make sure we have the best people. We will make key hiring decisions--for instance, we need an HR leader. I also want to improve sales force productivity. I'll also focus less on building vision. We're going to execute and win now.

Do you think SAP still struggles in the United States with having a stuffy German image?
If we do, I think that has been decisively addressed with the appointment of Bill McDermott. The leadership of SAP recognized they need a leader with 20 years of IT industry experience, a leader that's been the president of the most respected technology consulting firm in the industry, and a leader that clearly understands the American culture. They value me as person that can get things done in North America. So I don't think that's an issue.
On the contrary, I think SAP has an image that's back in style. It's a company of integrity and corporate values. There are lots of companies that are tired of the pathological Silicon Valley story.

What is the pathological Silicon Valley story?
Let's make zillions on stocks and treat people like throwaway resources. The reality is it's about customers, people and delivering successfully so you serve shareholders as well.