The shutdown of offices, retail outlets and other businesses around the world has been an inevitable consequence of a human tragedy.
It’s also been a loud wake-up call for organizations, who are seeing the value of a digital technology strategy.
Covid-19 has changed the face of business. Employees are working from home, using connected applications like never before. Manufacturers are rethinking the factory floor to enable social distancing. Cinemas, sporting venues, restaurants, bars, shops and thousands of other businesses have to revise their business models.
One thing is clear: Those businesses that have invested in digital technology have been the most resilient in the face of this crisis. Those that have not are lagging behind.
Our CEO, Sanjay Brahmawar, and CHRO, Elke Frank, spoke to the Frankfurter Allgemeine Zeitung recently to discuss the challenges seen in this changed business environment – and tell us how a combination of technology and culture is providing many of the answers.
Here is an English translation of the interview with FAZ:
Frankfurter Allgemeine Zeitung, June 13, 2020
By Manfred Kohler and Carsten Knop
Small- and mid-sized enterprises? A bit problematic!
The coronavirus is a wake-up call for the business world says Sanjay Brahmawar, CEO of Software AG. He and CHRO Elke Frank still see a lot of the Darmstadt identity in the company and have their sights set on €1 billion in revenue.
FAZ: So far, the IT industry has profited from the consequences of the Covid-19 pandemic. Online companies like Amazon are stimulating the stock exchange. Is Software AG also profiting from it?
Brahmawar: The Covid-19 pandemic is a human tragedy, so I don’t really think that there are companies that want to profit from it. But it’s definitely a wake-up call. Generally speaking, you could probably say that companies that have invested in digital transformation technology in the past are more resilient now. And those that were lagging behind in this area have bigger problems currently.
FAZ: Yes, but what does that mean for you?
Brahmawar: We’re in the fortunate position of enabling our customers’ business-critical applications with our products. Take our database and integration software, or our portfolio for the Internet of Things and analytics software. Everywhere projects are being approached seriously, we’re implementing those projects. Only companies that consider these types of investments as optional are still treating them as such.
FAZ: And where are the biggest problems?
Brahmawar: Essentially, I think that even though German small- and mid-sized enterprises (SMEs) are very successful all over the world, they still have a problematic attitude toward information technology. SMEs in Germany are not competitive enough digitally. We need to pick up the pace here and drive a real cultural change.
FAZ: But what about the public sector?
Brahmawar: Naturally the public sector isn’t as agile as the private sector. But the Covid-19 crisis has shown that things certainly can happen quickly when they need to. So, a cultural change is evident here as well.
FAZ: “Cultural change” is easy to say, but what are the challenges facing personnel development, especially in the midst of this crisis?
Frank: The keyword here is trust. In this type of situation, you have to have a great deal of trust in your employees, and you have to have confidence in them. You learn that you can’t really control everyone and everything in a home office environment. Another aspect is that you have to communicate much better with your employees. There’s no such thing as too much communication.
FAZ: Are you still hiring?
Frank: Yes, we hired more than 200 employees in March alone.
FAZ: So, you don’t have reduced hours or hiring freezes?
Frank: No, we haven’t reduced work hours and will continue to hire people, especially in Research & Development. But we also make sure that our costs are aligned with our revenue.
FAZ: Has the search for new employees gotten easier?
Frank: That depends on who you’re searching for. In Sales, it’s gotten somewhat easier in general. If you’re looking for Research & Development employees, it has become a little more difficult. These people tend to be a bit more risk-averse in a situation like this.
FAZ: Mr. Brahmawar, you’re running a company that is based in Darmstadt. You’re the jersey sponsor for the Darmstadt 98 soccer team, but Software AG isn’t very well known in the region.
What role does your company play in Hesse?
Brahmawar: We have our headquarters in Darmstadt, but we’re a truly global company that is active in more than 70 countries worldwide. Software AG collaborates closely with the state government of Hesse on digital transformation initiatives like the House of IT and Smart City Darmstadt. We’re an attractive employer here. Of course, we’re also involved with the Darmstadt University of Technology and Frankfurt School of Finance to support technological education.
And we work together with our foundation on a variety of social projects. We’re thrilled that Hesse has a number of very attractive industries with the corresponding customer base, including pharmaceuticals, banking, automakers and everything to do with the airport. And yes, we recently renewed our jersey sponsorship with Darmstadt 98 for another four years. It raises a lot of awareness about us.
FAZ: How do you see the current economic situation in Germany?
Brahmawar: We will certainly see a significant downturn this year but anticipate around five percent growth in 2021. After all, the government is taking action on issues like bailing out Lufthansa and approving massive stimulus packages. What I’m trying to say is that the more the stimulus packages help SMEs, the better.
FAZ: Your company’s revenues have already broken the billion-euro threshold in the past. When will we be seeing that again?
Brahmawar: Our goal is clear. We want to reach €1 billion in revenues in 2023. But we’ll do it with a realigned business model that focuses on recurring revenues. Even with a billion in revenue you can’t focus equally on everything, which is why we’re concentrating on specific leading markets now. Those are North America, Germany, the United Kingdom, France, China and Japan. We haven’t invested enough there in recent years, and we’re going to change that. We’re also expanding our cloud portfolio in the area of integration and IoT software and services. This will help us reach a global market potential of $20 to $24 billion. I’m sure we will be able to capture a significant part of that.
FAZ: And what are the growth trends?
Brahmawar: Of course, demand is still growing very strongly for integration software for digital transformation, for everything associated with cloud computing, and for everything companies need to connect mobile employees with their computer IT systems.
FAZ: Was replacing almost the entire Executive Board necessary for restructuring?
Brahmawar: Software AG has a marvelous history and strong products that we can build on. But aside from the strategic transition, there’s also a cultural change that we need to deal with. We have to become more agile. We’re simply much more diverse now and have a greater wealth of experience with transformation and change issues. We brought knowledge from many different competitors into our Executive Board. And I’m certain that we’re positioned very well.
Software AG is reprogramming itself
Software AG in Darmstadt is one of the largest providers of enterprise software. Out of 5,000 employees worldwide, one quarter of those are located in Germany. Software AG is a publicly traded company on the Tec-Dax and M-Dax and posted revenues of €890 million in 2019 with €188 million in net profit. Founded shortly before the moon landing in 1969, the company develops software to analyze huge volumes of data and automate business processes. Its customers include banking institutions, government agencies, insurance companies and major corporations. In addition, a significant portion of its revenue comes from maintenance and consulting. For the last few years, the company has also developed platforms that enable customers to store large data volumes and computing processes in the cloud. This enables the “Internet of Things,” meaning the direct communication between computers and production equipment. Many believe this will deliver a boost in productivity similar to the assembly line.
In August 2018, former IBM Manager Sanjay Brahmawar took over as CEO at Software AG. Brahmawar’s main job is to successfully restructure the company, because business has been stagnating for years. Among other things, a growing number of businesses want to lease software instead of purchase it. When Telekom Manager Elke Frank joined the company in summer of 2019, she became Software AG’s first-ever Chief Human Resources Officer. Her presence on the Board should underscore the role of personnel development in the company’s growth strategy. She is the co-author of the book Out of Office: Warum wir die Arbeit neu erfinden müssen (Out of Office: Why We Have to Reinvent Work).
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