SAP Stays the Course with Kagermann

Applications market leader SAP  said today that it has extended the tenure of CEO Henning Kagermann through May 31, 2009, dashing fears that a succession fight could derail the company’s efforts to reposition itself in the mid-market.

SAP’s most recent sales and earnings figures disappointed Wall Street and missed the company’s internal targets. Discontent with that kind of performance has often cost CEOs their jobs.

The extension is a vote of confidence for Kagermann’s new strategy for the mid-market, which he announced during an otherwise lackluster earnings call.

The new strategy involves a new product, code-named A1S, which Kagermann promised will be “game-changing.”

SAP supervisory board chairman Hasso Plattner said the company recognizes that SAP “has significantly extended its global market leadership in the business software space” under Kagermann’s leadership.

“We are committed to further pursuing this successful course,” he said in a statement.

SAP has been known primarily for selling enterprise resource platform (ERP)  applications into the Fortune 1000 and Global 2000 market. A1S is intended to help SAP penetrate the mid-market.

In the past half year, SAP has launched a number of new initiatives it hopes will increase its market scope.

Duet, a partnership with Microsoft  is a new front-end interface aimed at seducing non-power users in companies already running SAP, thus driving up the number of seats in existing accounts.

The Walldorf, Germany giant also invested in a new governance, risk management and compliance application that began shipping in the last quarter of 2006.

Charles King, principal analyst with Pund-IT Research, said the board’s vote is a “vote of approval” for Kagermann’s strategy.

“When a company gets into a transitional mode, especially a company the size of SAP, it takes strong leadership at the top. You need somebody that understands the core business but has the imagination and willingness to engage in measured risk-taking to make something like this a success.”

Ray Wang, who covers enterprise software companies for Forrester Research, noted that under normal circumstances in Germany, executives are encouraged to retire at an early age, and that Kagermann could have just as easily been eased into a board chair or professorship.

But Wang said Kagermann may be the only one who can hold the talented but ambitious executive team together, particularly as the company repositions itself with its NetWeaver platform.

“He’s the calming force that they need to move from being an enterprise applications vendor to a high-tech ecosystem,” Wang told internetnews.com.