Q&A: SAP's Bill McDermott on IT Priorities in a Tough EconomyQ&A: SAP's Bill McDermott on IT Priorities in a Tough Economy

Cash is king and process efficiency is the next best thing to growth. That's Bill McDermott's take on corporate priorities given today's global recession. A veteran of Siebel, Gartner and Xerox, McDermott joined SAP North America in 2002. Now President and CEO of Global Field Operations and recently named an Executive Board Member of SAP AG, McDermott talks about corporate survival and innovation through business intelligence, performance management and process management initiatives.

SAP has important strategic initiatives around both performance management and process management. Which one is now in greater demand given the state of the economy?

I'd say they're both viewed as important. I was recently at a meeting held by an SAP partner that hosted its top 100 customers worldwide, many of which were also SAP customers. These executives said they were staying very true to their strategic projects, and they weren't backing off regardless of the economy. They talked a lot about cash and liquidity because everybody is focused on the balance sheet right now. The other thing they are trying to do is become leaner. If you're a retailer, for example, you're thinking about pricing and margins because retailers have to spot the winners, kill the losers and get as much price as they can by managing margins obsessively. There was also a lot of talk about automating the supply chain and controlling days' sales outstanding and inventory turns in comparison with industry benchmarks.

There was also tremendous energy at this event around the customer, because the worse things get, the closer you have to get to your customer. When things don't go well, a lot of companies focus inward and get more insular, but that's what can kill a company. We talked a lot about intimacy with customers, how you segment markets and how you look for opportunities to up sell, cross sell and improve the customer experience.

Can you give an example of a company getting more intimate with customers?

We probably both frequent a certain retailer that sells shaving cream and razors, and in the back of the store they also have your prescriptions. Today, when you check out at the front of the store with your shaving cream, chewing gum and prescription, they give you, say, a $2-off coupon for Advil as a loyalty credit because you're a good customer. The problem is that you're already on your way to the car, so that may not hold much value. The vision for getting more intimate with the customer is to buy a chain of "doc-in-the-box" type clinics and automate the connection between the prescription and the pharmacy so things are filled and refilled in a high-quality way. There's also the concept of creating a kiosk or some sort of loyalty program that is presented when they enter the store so they know the various kinds of benefits available in all the various isles. If you have a heart condition and Lipitor is your prescription, maybe certain vitamins or supplements are good for that condition and the retailer can offer a discount for them. These efforts will create closer customer intimacy.

That's a good example of a business process initiative, but what about the interest in performance management you mentioned?

I recently had a conversation with the CEO of a global company that is in distress. They are having all sorts of trouble, and this CEO said to me, "of all the things you can talk to me about, tell me about getting my own digital dashboard so I understand where the money is moving in my business. I need to have the facts about what's happening with my suppliers and customers, and I need to see in real time how I'm moving or not moving the needle."

Our Business Objects acquisition and this whole performance optimization category has transformed SAP. I'll underscore that with the example of a bank that recently announced it will invest a significant amount of money in business intelligence and enterprise performance management technology on the same day that it announced it would be laying off multiple thousands of people. So what we're seeing is that companies are doubling down on IT investments that give them visibility into performance. When the discussion turns to performance management, is it about financial PM -- the controlling the cash part -- or are operational initiatives getting attention as well?

It's both. It started out with the CFO -- "I have to have compliance" and "I have to know what's going on with cash and liquidity" -- but the CEO needs his or her dashboard, too, because they care about what's happening with the company's talent. If you're heading a company that has to do more with less, I better know where the top 10 percent of my people are in the world, what function they are in. And if I can't afford big bonuses, I better have some secret sauce to keep that top 10 percent within the company. That's an HR operational initiative that the CEO cares about. At the same time, if I have to cut my supplier base by a third so I get more bang for the buck with all my suppliers, I better focus operationally on the performance of my supply chain. And if I'm the head of sales, I better know what's going on with my sales pipeline in real time. In today's market, sales also has to be worried about CFO-related questions such as, is days' sales outstanding going in the wrong direction? Do I have a customer on the close plan that is also a high credit risk such that I can't get them financing or they can't pay their bills? There are all kinds of analytical issues now exacerbated by this tough economic scenario, and it's forcing all lines of business to focus on digital dashboards, real-time insight and analytics to run the business.

Are you seeing new IT initiatives aimed specifically at coping with crisis conditions?

Anything having to do with getting a handle on cash and liquidity is likely to be a net new application, even for some of the most sophisticated customers. The idea of lean operations is also very hot. How do I do a lot more with a lot less? You'd be stunned to find out how many applications are in place at the average bank. With no exaggeration, the average large bank is probably running 100 or more financial applications. So the whole idea of getting lean, rationalizing operations, choosing the winners and improving efficiency is huge.

In times like these, everybody in senior management needs business intelligence and analytics to measure, manage and report on what's going on in the business. When the CEO walks into the board room these days, it's not enough anymore to have the PowerPoint deck. Boards are asking tough questions, and they are getting right into the balance sheet, the P&L and the operating units. They want to know what's going on, and if you can't report on that and give them data that's consumable very quickly, you start losing control.