ExecutiveBiz recently sat down with Mark Testoni, President of SAP Public Services. He told us the three keys to growth in a tough economy, how SAP attracts and retains the top talent in the software industry, and why Tony Bennett is the most enduring talent in music today. Read on to find out more.
ExecutiveBiz: What are SAP’s core competencies?
Mark Testoni: There are lots of key players in the enterprise software industry around Washington – IBM, Microsoft, Oracle, among others. What makes SAP different is the people — their talents and passion. That really drives the level of business and the level of penetration in the market. Then you layer upon that an intense focus of the customer, innovation in helping the customer solve a business problem, or create a better work environment. If there’s an attitude that’s pervasive at SAP Public Services it is passion.
“We are competing with a thousand different ‘screaming voices’ all claiming to have an answer. But we understand that while dollars may be constrained and cut out of traditional back-office functions…they are still going to get dollars for their programs. If we provide innovation and service, we will continue to win business.” -Mark Testoni
ExecutiveBiz: What do you do that’s different to recruit and retain the top talent in the industry?
Mark Testoni: Several things. First, people like to be with a winner. SAP arguably has been the top dog in the business-application sector of this industry for a long time. That gives us an inherent advantage. Second, good leaders attract good peopl
e. Strong professionals want to win; they look to be around others with a history of success.. Compensation around the beltway is relatively in the same range. What we’ve tried to do is attract the winners. This really started in North America with Bill McDermott’s — who has risen to be our co-CEO — arrival back in the early 2000’s.
ExecutiveBiz: How are you going to keep growing in this tough economic climate?
Mark Testoni: We are not your mother’s SAP, which was the software that did traditional “back office” functions like financial management, HR, supply-chain management. It still is our backbone, but we’re growing in areas around information exploitation, rendering and reporting—to help our customer on the mission or direct business side. Two years ago we acquired a company by the name of Business Objects. Business Objects provides what we call “Business Intelligence” tools that help a company really drill down and understand its data, and to make decisions predicated on that information. With this acquisition and these capabilities, we are now able to focus on the “mission side” of our customers.
The second force we bring, particularly to government customers, is innovation. We’ve been able to come up with solutions in “market speed” time, that provide immediate return on investment for our customers. Here’s an example: We developed a stimulus reporting tool that allowed government customers to track expenditures under the American Reinvestment and Recovery Act (ARRA), a function they were required to have. From start to deployment of this solution took us only about 60 days – that’s warp speed in software development. This solution was one of several that helped us drive SAP into areas we had never been before.
This is a tough economic environment. We are competing with a thousand different ‘screaming voices’ all claiming to have an answer. But we understand that while dollars may be constrained and cut out of traditional back-office functions, dollars will still be appropriated for the mission side of an agency, whether it’s the Department of Transportation, Homeland Security, USDA or Department of Health and Human Services. They are still going to get dollars for their programs. If we provide innovation and service, we will continue to win business.
ExecutiveBiz: 2009 saw a lot of really high profile acquisitions, despite the credit crunch. Does SAP’s long term growth plan include any major acquisitions in 2010?
Mark Testoni: I’m not privy to all those discussions and decisions. But when we acquired Business Objects in 2008, it was one of the largest acquisitions in the industry’s history. There aren’t a lot of huge players out there today; our strategy has been for smaller tuck-in acquisitions, looking for solutions to complement our existing platform.
ExecutiveBiz: So what would you say is your biggest challenge in business today?
Mark Testoni: Certainly on the business side and in the government, there’s a lot of uncertainty right now. At the federal level, there’s much speculation on what direction things like defense programs are going. These historically are large expenditures and potential markets. In the state and local environment, the impact of recession is really hitting home this year and next. The state budget deficit anticipation for fiscal 2010 is about $100 billion, and it’s about $140 billion in 2011. I was in Mississippi just recently and they’re really grappling with how to get to provide citizen services faced with their budget situation. Most of the other states are in the same position. Our challenge is to provide a difference in our solutions quickly. In the past, it might be perfectly acceptable to a state officer to invest in a project whose return on investment was 10 years. Today it’s more like 10 months. It’s like the internet – instantaneous need and demand for solutions now.
ExecutiveBiz: How has your business or business model been affected by competitive in-sourcing?
Mark Testoni: It’s a challenge in government all the time. There are a ton of utility activities inside government, particularly in the federal space and DOD — some of the larger federal agencies where we compete all the time. Generally what they do is custom-develop solutions in house, which has been another challenge for us. What we’ve decided to do is partner with government agencies. You may recall the Office of Management and Budget’s line of business initiative, where agencies aligned in their business function. Even prior to that SAP Public Services reached out to government agencies like the Department of Interior and Federal Aviation Administration to create what we called Centers of Excellence. Here, we were able to co-develop with our government partners the best-of-breed software applications that put them right in line with the OMB’s mission, and helped them gain funding for critical missions. This is something we’ll continue to do. Partnership is paramount.
ExecutiveBiz: So what’s SAP going to look like three years from now?
Mark Testoni: Six months is like a lifetime in the software industry. Looking into the crystal ball, I’d see SAP as a primary solutions provider across a number of spectrums for IT within government and in the private sector. Components of what we provide government customers will be viewed less on function and more on accomplishing missions, whether that is fighting wars, providing national security, whatever. We’ll be known as a partner, not just a vendor.
ExecutiveBiz: What’s something most people don’t know about you or would be surprised to learn about you?
Mark Testoni: As a child of the late 60s and early 70s, I am a classic rock and roll junkie. Back in an era when records were vinyl, not something you earned after a trip to jail! In the days I measured my hair in inches of length, not in head territory covered. I am trying to see all the old rockers in concert before they stop touring…many have stopped. I love rock concerts. In recent years, I’ve seen the Stones, Eric Clapton, Steve Miller Band, Jethro Tull, Neil Young and Steve Winwood. My favorite album all time is “Dark Side of the Moon and I did see Roger Waters perform it a few years ago. I am not totally old school, as I like some other newer acts like John Mayer and Dave Matthews. Probably the most enduring musician of all is Tony Bennett—the dude cans still do it in his mid-80s!