SAP has a new star

May 16, 2012: 9:11 AM ET

The company has been notoriously lagging in software-as-a-service. Enter one energetic and eccentric executive, Lars Dalgaard.

FORTUNE -- SAP's Lars Dalgaard has been called irrepressible, energetic and eccentric (and, according to at least one analyst, a "lunatic"). But he may be just what the stodgy company needs to give it a shot in the cloud.

As nimbler players like Salesforce (CRM) and soon-to-be-public Workday have expanded their cloud offerings and customer base, SAP (SAP) has been notoriously behind in software-as-a-service. Enter Dalgaard. Earlier this week the 44-year-old head of SAP's cloud division took the stage at the company's annual user conference in Orlando, Florida to unveil a new strategy. The plan is to release a "loosely coupled suite" of cloud-based business applications like payroll software and a financial product called Financials OnDemand. There's also a new, unified platform-as-a-service offering, which runs on top of SAP's HANA in-memory database. To jumpstart these new products, SAP says it now has over 5,000 people dedicated to "designing, building and delivering beautiful cloud solutions."

But all eyes are on one person in particular -- Dalgaard. There was a lot of skepticism when SAP paid a hefty $3.4 billion for SuccessFactors, the cloud-based human capital management provider Dalgaard still oversees, in addition to his new duties across all of SAP's cloud efforts. But, shortly after the acquisition was announced, co-CEO Bill McDermott told Fortune that the purchase was as much about getting Dalgaard as it was about getting SuccessFactors' customer base or cloud "DNA." And Sanjay Poonen, president of SAP's global solutions, had said that Dalgaard's personality -- a.k.a. an exec with enough chutzpah to challenge the likes of Salesforce.com's Marc Benioff -- was needed in this space.

MORE: SAP throws down the gauntlet in database wars

Indeed, no one -- except maybe Benioff -- quite matches the enthusiasm and passion Dalgaard brings to any conversation about the cloud. He's an emotional leader, for one. While addressing his employees last December to talk about the upcoming acquisition by SAP, Dalgaard wept. (I was there, and seriously, the guy shed a few tears).

It's too early to tell whether SAP's new cloud products will fare better than the company's earlier attempts, but at big part of the company's success in this space hinges on Dalgaard's ability to sell his vision both internally and externally. He's made it clear he believes all software -- including core enterprise resourcing planning tools -- will someday soon reside in the cloud. And, at least on the surface, it appears management now agrees with him. Dalgaard was recently made a member of SAP's executive board, and co-CEO Jim Hagemann Snabe said he also believes "everything will be in the cloud" within five years.

Dalgaard may have a bright future at SAP. He is emblematic of the type of change and innovative ethos SAP needs. But first, he needs to successfully pull off an ambitious cloud strategy for a company that's still very much focused on milking cash out of on-premise customers. And he needs to stick around in a huge, bureaucratic firm long enough to reap the benefits of what he's trying to start.

MORE: Splunk makes a splash

Just last year, SAP and SuccessFactors were up against each other, competing for an account with the Royal Bank of Canada. SuccessFactors won because SAP's solution wasn't as good. Today, the two are trying to take on other cloud competitors together. On stage at SAP's annual conference, Dalgaard didn't disappoint. Much like a TV preacher, he paced around the room and emphasized just the right words -- including, not surprisingly, "cloud."

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About This Author
Michal Lev-Ram
Michal Lev-Ram
Writer, Fortune

Based in Silicon Valley, Michal Lev-Ram covers enterprise and mobile technologies for FORTUNE. Prior to joining FORTUNE, she wrote for CNNMoney, Fast Company, Popular Science and other business and technology publications. She was also a staff writer at Business 2.0 and holds a B.A. in journalism from San Francisco State University.

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