The CEO of SAP is stepping down, and his replacements signal a new willingness to compete with Salesforce and Workday in the cloud

• Bill McDermott, CEO of enterprise software giant SAP, is stepping down, the company said Thursday.
• The abrupt announcement didn't give a reason for his departure, but SAP says that McDermott will stay on as an advisor through the end of the year.
• He will be replaced by two members of the SAP executive team, Jennifer Morgan, president of the company's cloud business group, and chief operating officer Christian Klein.
• Analysts say the change - and the appointment of Morgan, an experienced cloud leader - underscores SAP's effort to adapt to an evolving enterprise tech market where it faces challenges from cloud software giants led by Salesforce and Workday.
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Bill McDermott, CEO of SAP, is suddenly stepping down in what analysts see as a major move for the enterprise software giant as it confronts challenges in the cloud.

McDermott will be replaced by two members of the SAP executive team - Jennifer Morgan, president of the company's cloud business group, and chief operating officer Christian Klein, the company said Thursday. Morgan and Klein will take the title of co-CEOs.

No reason was given for McDermott's departure, but he will stay in an advisory role until the end of the year, SAP said.

"Every CEO dreams of being able to transition a company to its next generation from a position of significant strength," McDermott, who joined SAP in 2002, said in a statement. "When you look at where we were and where we are, I simply could not be prouder of what this company has achieved over the past decade."

In a statement, Hasso Plattner, chairman of SAP's supervisory board, praised McDermott's "invaluable contributions to this company," noting that "he was a main driver of SAP's transition to the cloud, which will fuel our growth for many years to come."

A big shift

SAP is one of the dominant players in the market for enterprise software used by businesses, including the world's largest corporations, to manage their operations.

But like other major enterprise software companies, including Oracle and IBM, SAP has had to adapt to the rise of the cloud, which has dramatically changed the way businesses access business software applications.

Instead of paying hefty licensing fees for software installed in private data centers, the cloud made it possible for businesses to access set up their networks and access applications through web-based platforms, typically based on a subscription model.

That has been a challenging transition for companies like SAP as it faces cloud-based rivals such as Salesforce and Workday.

"For sure, SAP is a company that is transforming," Adaire Fox-Martin, a member of the SAP executive team, told Business Insider in August. "I think we're at the tail end of that process in terms of the transformation of our business to the cloud." She said SAP is looking to triple its cloud revenue to $15 billion a year by 2023.

Making up on lost ground

Analysts say SAP, like other traditional software vendors, was late in the transition to the cloud. But the appointment of Morgan, in particular, shows a renewed investment in the cloud. As the now-former leader of SAP's cloud business, she's well-positioned to know the ins and outs of that market.

IDC analyst Mickey North Rizza said SAP is now "making up on lost ground," as it appeals to customers who are using both traditional servers, and major cloud platforms like Amazon's, in the so-called hybrid-model.

"Their customers are going hybrid so that helps as they move forward," he told Business Insider.

IDC President Crawford Del Prete also told Business Insider: "This is an important change for them and is clearly a pivot deeper into the cloud and subscription business models," he told Business Insider. "It will accelerate the company's transition, in my opinion."

Analyst Ray Wang of Constellation Research agreed. "I think where we are is they are putting a new chapter in play," he told Business Insider. "Bill McDermott had an amazing run and a great team to get there," he said.

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