Visit the management section on SAP's (NYSE: SAP) website, and you'll see Shai Agassi's bio in the No. 2 spot. But by April 1, he'll be gone, replaced by current No. 3 player Leo Apotheker.
Agassi was widely considered SAP's CEO-in-waiting, but the extension of current CEO Henning Kagermann's contract through 2009 apparently gave Agassi second thoughts. Though the move likely won't disturb SAP's core business, it could lead the company to miss big opportunities in the on-demand space.
Starting in the early 1990s, Agassi founded several software companies, selling one to SAP in 2001. A year later, he was the president of its Product and Technology Group.
The beginning of the decade was a critical time for SAP, as Oracle (Nasdaq: ORCL) pushed aggressively into enterprise resource planning (ERP) software through a string of big acquisitions. ERP helps companies manage human resources, accounting, payroll, and other key functions. Over the past year, it seems Oracle's pressure has begun to take its toll: Oracle's stock is up 33%, while SAP's shares are off 13%.
SAP also announced in January that it will need to invest $400 million to $500 million over the next two years to improve its product line, making it more appealing to smaller customers. As a result, 2007 operating margins should fall from 27.3% to between 26% and 27%.
The massive investments are an admission that SAP came late to the on-demand party. Business software delivered via the Internet has been a growth business for companies like Salesforce.com (NYSE: CRM), RightNow (Nasdaq: RNOW), Taleo (Nasdaq: TLEO), and NetSuite. Agassi was SAP's on-demand evangelist, and it seems he didn't want to wait until 2009, at the earliest, to become SAP's CEO. There's also the possibility that he left because he felt SAP's on-demand initiatives weren't moving fast enough.
Driving real change in a global company takes a charismatic leader with a clear strategy. Without Agassi, things will only get murkier for SAP shareholders. In the meantime, rivals like Salesforce.com and NetSuite will continue to bolster their businesses.
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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 1,590 out of 24,619 in CAPS.
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