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SAP’s CEO Bill McDermott today announced that he wouldn’t seek to renew his contract for the next year and step down immediately after nine years at the helm of the German enterprise giant.
Shortly after the announcement, I talked to McDermott, as well as SAP’s new co-CEOs Jennifer Morgan and Christian Klein. During the call, McDermott stressed that his decision to step down was very much a personal one, and that while he’s not ready to retire just yet, he simply believes that now is the right time for him to pass on the reins of the company.
To say that today’s news came as a surprise is a bit of an understatement, but it seems like it’s something McDermott has been thinking about for a while. But after talking to McDermott, Morgan and Klein, I can’t help but think that the actual decision came rather recently.
I last spoke to McDermott about a month ago, during a fireside chat at our TechCrunch Sessions: Enterprise event. At the time, I didn’t come away with the impression that this was a CEO on his way out (though McDermott reminded me that if he had already made up his decision a month ago, he probably wouldn’t have given it away anyway).
“I’m not afraid to make decisions. That’s one of the things I’m known for,” he told me when I asked him about how the process unfolded. “This one, I did a lot of deep soul searching. I really did think about it very heavily — and I know that it’s the right time and that’s why I’m so happy. When you can make decisions from a position of strength, you’re always happy.”
He also noted that he has been with SAP for 17 years, with almost 10 years as CEO, and that he recently spent some time talking to fellow high-level CEOs.
“The consensus was 10 years is about the right amount of time for a CEO because you’ve accomplished a lot of things if you did the job well, but you certainly didn’t stay too long. And if you did really well, you had a fantastic success plan,” he said.
In “the recent past,” McDermott met with SAP chairman and co-founder Hasso Plattner to explain to him that he wouldn’t renew his contract. According to McDermott, both of them agreed that the company is currently at “maximum strength” and that this would be the best time to put the succession plan into action.
SAP co-CEO Jennifer Morgan.
“With the continuity of Jennifer and Christian obviously already serving on the board and doing an unbelievable job, we said let’s control our destiny. I’m not going to renew, and these are the two best people for the job without question. Then they’ll get a chance to go to Capital Markets Day [in November]. Set that next phase of our growth story. Kick off the New Year — and do so with a clean slate and a clean run to the finish line.
“Very rarely do CEOs get the joy of handing over a company at maximum strength. And today is a great day for SAP. It’s a great day for me personally and Hasso Plattner, the chairman and [co-]founder of SAP. And also — and most importantly — a great day for Jennifer Morgan and Christian Klein.”
Don’t expect for McDermott to just fade into the background, though, now that he is leaving SAP. If you’ve ever met or seen McDermott speak, you know that he’s unlikely to simply retire. “I’m busy. I’m passionate and I’m just getting warmed up,” he said.
As for the new leadership, Morgan and Klein noted that they hadn’t had a lot of time to think about the strategy going forward. Both previously held executive positions in the company and served on SAP’s board together for the last few years. For now, it seems, they are planning on continuing on a similar path as McDermott.
“We’re excited about creating a renewed focus on the engineering DNA of SAP, combining the amazing strength and heritage of SAP — and many of the folks who have built the products that so many customers around the world run today — with a new DNA that’s come in from many of the cloud acquisitions that we’ve made,” Morgan said, noting that both she and Klein spent a lot of time over the last few months bringing their teams together in new ways. “So I think for us, that tapestry of talent and that real sense of urgency and support of our customers and innovation is top of mind for us.”
SAP co-CEO Christian Klein
Klein also stressed that he believes SAP’s current strategy is the right one. “We had unbelievable deals again in Q3 where we actually combined our latest innovations — where we combined Qualtrics with SuccessFactors with S/4 [Hana] to drive unbelievable business value for our customers. This is the way to go. The business case is there. I see a huge shift now towards S/4, and the core and business case is there, supporting new business models, driving automation, steering the company in real time. All of these assets are now coming together with our great cloud assets, so for me, the strategy works.”
Having co-CEOs can be a recipe for conflict, but McDermott started out as co-CEO with Plattner, so the company does have some experience there. Morgan and Klein noted that they worked together on the SAP board before and know each other quite well.
What’s next for the new CEOs? “There has to be a huge focus on Q4,” Klein said. “And then, of course, we will continue like we did in the past. I’ve known Jen now for quite a while — there was a lot of trust there in the past and I’m really now excited to really move forward together with her and driving huge business outcomes for our customers. And let’s not forget our employees. Our employee morale is at an all-time high. And we know how important that is to our employees. We definitely want that to continue.”
It’s hard to imagine SAP with McDermott, but we’ve clearly not seen the last of him yet. I wouldn’t be surprised if we saw him pop up as the CEO of another company soon.
Below is my interview with McDermott from TechCrunch Sessions: Enterprise.
Enlarge (credit: Arman Zhenikeyev)
Federal prosecutors have charged three men and a woman with sex trafficking charges for operating the popular porn site GirlsDoPorn. At least 22 women featured on the site have sued the site's owners, charging that the pornographers used lies and coercion to gain their participation.
The 22 women said they responded to ads for clothed modeling gigs. When they were asked to shoot porn instead, they initially resisted. But they went along with it after the company assured them that their videos would only be sold on DVD to customers outside the United States and would not be posted online. That turned out to be a lie, as their videos wound up on GirlsDoPorn, a website with plenty of American viewers.
"I was in a state of panic when I first found out," one of the alleged victims testified in court. "I couldn't believe it. I still can't believe it."
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Three years ago, the founder of LendingClub, Renaud Laplanche, took the wraps off his second act, a consumer lending venture called Upgrade that now employs 350 people, has lent roughly $2 billion to 200,000 people, and has raised $142 million from investors.
It was jumping into a crowded market that has only grown more frenzied, with an seemingly endless number of fintech startups that market themselves as more thoughtful alternatives to established banks and traditional credit card companies. While giants like Visa and MasterCard charge interest and late fees for overdue payments, for example, the Stockholm, Sweden-based company Klarna, which allows shoppers to buy now and pay later, makes money through retailer transaction fees and late fees but doesn’t charge interest fees. In a similar twist, Max Levchin’s lending company, Affirm, doesn’t charge late fees when its customers rack up big charges but it does charge interest rates (sometimes as high as 30 percent).
Upgrade is slightly different in that that it doesn’t invite customers to defer their payments when they buy something using dollars from Upgrade. But it still largely fits into the same mold in that it markets itself as better for lending customers and more mindful of them. Its flagship personal loans product, for example, is largely used by customers to pay off credit cards and it features credit health tools that ostensibly teach people how to improve their credit scores.
It also charges up to 35.89 percent interest.
A brand-new credit product — the Upgrade Card — takes things even further on the feel-good front. As Laplanche explains it, the card “basically combines the payments capabilities of a credit card with the low cost of a bank loan into one single product.”
Adds Laplanche of this hybrid creation: “Lending Club created a $100 billion industry with personal loans 12 years ago; I think this is 10 times bigger — and 10 times cheaper for consumers.
We’re inherently skeptical of most lending products being good — or “cheap” — for customers. But here’s how it works: instead of asking a cardholder to pay a minimum amount each month from the balance they owe on their card, Upgrade breaks down the balance into an installment plan with equal monthly payments — plus an interest payment — that can be completed in a year to three years’ time.
“It’s like a mortgage or a car loan with a clear payment schedule,” says Laplanche. “You can budget for it and it sort of forces you to pay down the balance over a reasonable period,” unlike credit cards where customers can run a balance for as long as they like — which can wind up costing them an arm and a leg in interest payments alone over time.
There is no prepayment penalty and the card replenishes as it is paid off.
More, unlike many credit cards that reward users for spending with cash back and other perks, Upgrade customers receive 1% cash back each time they make a payment toward their balance.
Still, there is an annual percentage rate as with most credit cards, and it’s not much kinder than other alternatives, with an annual interest rate that ranges from 6.49% to 29.99%
Laplanche further concedes that, as with any lending product, customers who miss payments or start with a lower credit score are more likely to confront a higher interest rate than someone who is able to pay off their card as they use it.
Upgrade partnered with Cross River Bank to create the new card. The 11-year-old, Fort Lee, N.J.-based institution has itself raised at least $128 million over the years, including via a $100 million round led by KKR that closed late last year and a $28 million round put together in 2016 with the help of Battery Ventures, Andreessen Horowitz, and Ribbit Capital, among others.
Cross River has become the go-to institution for a lot of fintech startups, including Affirm, Transferwise, and Coinbase — startups that want to stay compliant with consumer protection regulations but might have had trouble partnering with a large bank, especially when starting out.
Upgrade, which closed its last round, is probably due for a new round itself, having closed its $62 million Series C round in August of last year. Asked about this, however, Laplanche says only that, “We’re good.”
In the meantime, it’s apparently planning ahead with the resources it has currently. Beyond the Upgrade Card, the company expects to introduce a savings account in the first quarter of next year, a move similar to the move Robinhood announced earlier this week when it unveiled a high-yield cash management account. It makes sense. If the economy turns, and it seems likely given the ongoing spat between China and the U.S., not to mention other unanswered questions, consumers are likely to look increasingly for safe havens like savings and cash management accounts.
Whether the moves are enough to insulate Upgrade, or numerous other fintech startups, in a serious downturn, remains to be seen, but Laplanche has weathered worse before. Though LendingClub was among the first peer-to-peer lenders and enjoyed a splashy debut on the public market in the summer of 2014, by the spring of 2016, Laplanche was asked to resign and was soon after charged by the SEC with fraudulently inflating the company’s returns. He settled with the agency last year without admitting wrongdoing. He also paid a fine and agreed to be barred from the securities industry for three years.
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