Change is the giant spotlight that can illuminate a corporation’s blemishes and betray its secrets, but the friction of which is also kinetic, its heat ready to ignite a magnificent oeuvre and to liberate talent

Departures, and what they mean

ON JULY 25, 2013

I don’t believe much in soul mates, at least where corporations and executive leadership are concerned. I believe in calculated choices and fortuitous timing, in harmonious teams, in achievable but auspicious goals, articulated with inspirational verve and backed by unmitigated, obstinate will. New leaders emerge. Old ones leave to pursue the next dream, or get kicked out, sometimes for no good reason at all.And life always seems to go on.

You see, I believe in change, the giant spotlight that can illuminate a corporation’s blemishes and betray its secrets, but the friction of which is also kinetic, its heat ready to ignite a magnificent oeuvre and to liberate talent. It happens constantly, often sneaking up on us amid what appears on the outside to be a mess, but is really just natural corporate photosynthesis.

You can see it happening now. The past several months have been messy, with self-induced shake-ups at Google and Microsoft, surprising leadership changes at SAP, a mass-exodus from VMWare, and unsettling change at Fusion-IO, to name a few.

The changes have flashed like a lightning storm. You know it’s bad when the best way to cover the industry’s news is to create a feed of every technology exec’s LinkedIn page (where I just endorsed VMWare CEO Pat Gelsinger’s for the skill of “orchestrating departures”).

Like any storm, these moments will pass and may very well reveal a brighter day.

Before the summer could even begin, Google announced that Andy Rubin would no longer be heading up Android, the mobile operating system he birthed almost 10 years ago at Android Inc. Rising star Sundar Pichai, who had previously headed up Google Chrome and Apps, added Android to his remit, and sent the rumor mill scurrying — had Rubin fallen out of favor or gotten bored, would Android and Chrome finally concatenate, was Rubin the entrepreneur working leaving the company to start something new, or being put on yet another secret Google project to outdo Glass or the self-driving car.

No matter. As all the drama abated, Google had already moved on, and soon it was all forgotten. The press ran breathlessly toward Pichai (he was escorted during parties at Google I/O by handlers, as if he were a new member of the royal family). Stars alight with frequency, and with good reason, it seems. Pichai led Google’s most recent announcement of the company’s Chromecast device, and the newest Android tablet, running the newest version of the mobile OS. Google stock is down based onrecent earnings target misses, but the company’s revenue continues to rise.

In contrast, there was an enormity to Microsoft’s most recent organizational changes, but it has a few more problems to solve — its most recent earnings included across-the-board misses, despite some growth in key enterprise segments.

Re-aligning an organization around functions (in Microsoft’s case, engineering, marketing, finance, HR, legal, business development and so on) is hardly new. Companies constantly flatten and then consolidate, or revolve the organization around product segments, and then to customer segments, or streamline sales teams, and then creating internal competition. It’s a bit like changing around the living room furniture: It’s welcome and refreshing at first, but as with anything, everyone quickly settles back in, and the dog remembers its favorite place to fart.

Microsoft’s re-org also featured a few personnel moves: Operation systems, including mobile, report to Terry Myerson; hardware and Microsoft Studio will report to Julie Larson-Green; Qi Lu is in charge of applications and services; Tony Bates runs business development. All of this followed some notable departures, reaching all the way back to last fall’s resignation (or firing) of Windows chief Steve Sinofsky, whom many Microsoft observers had considered the company’s CEO-in-waiting. Observers are frequently merely that.

There had been plenty of talk (again, by those observers) about infighting between divisions at Microsoft, and this re-org (labeled “One Microsoft,” and announced with great fanfare through a not-so-internal memo posted on Microsoft’s website) may put in place the structure to eliminate some of it. While that is a worthy goal, it’s still a long stretch to see where this shuffling of deck chairs will fix all of Microsoft’s short-term problems. But is all the furniture moving necessary for us to see? Just get on with it, and call me when everyone — most importantly customers — are happy.

Speaking of getting on with it, for those who blinked, there was also a dust-up over at Fusion-io, the high flying supplier of flash-based storage to the likes of Apple and Facebook, OEMs like HP, and generally to data centers that want to deliver data faster, cheaper and with a lower energy footprint. The company’s IPO two years ago disappointed many industry observers (them again!), and its stock is trading at an all-time low. Although Fusion-io grew quickly and provided some unique advantages, dozens of other companies also saw the opportunity — notably companies like EMC, IBM, and a jillion startups.

In April, Fusion-io made a significant acquisition of NexGen, a company in the business of selling hybrid storage arrays (hybrid meaning that its systems included both traditional disk technology and flash storage, provided unsurprisingly by Fusion-IO). The market for hybrid storage is much bigger than for flash-based systems, analysts say. Fusion-io articulated a strategy around selling NexGen’s software (plus its own Flash storage technology) to systems integrators, the idea being that everything in the data center is starting to revolve around software-defined controls. For storage, software-defined controls means the ability to provision the right storage (disk or flash) to the right applications based on performance needs, data value and cost. In other words, instead of duking it out with a bunch of commodity flash players, Fusion-io would differentiate itself up the stack, so to speak.

Shortly after the NexGen acquisition Fusion-io founders David Flynn (CEO) and Rick White (CMO), left in what seemed like a bit of a huff — no thank you, no goodbye, no hate-to-eat-and-run. Suddenly board member Shane Robison, the former strategy chief at HP was at the helm. Remember Robison? He was said (by HP CEO Meg Whitman, no less) to have had his fingerprints on the galactically disastrous acquisition of Autonomy, which nobody really quite understood at the time, and which even HP, it turns out, can’t understand now.

It’s easy enough to understand the untimely ousting of Flynn and White. Fusion-IO may have reached a ceiling that was holding back growth – its most recent quarter saw a downturn in both revenue and profits (a net loss of about $20 million vs $4.7 million a year earlier). Many storage industry analysts applauded Flynn’s newest attempt reignite Fusion-io’s growth, and indeed the strategy may hold great promise. But sometimes, for no good reason at all, change is necessary.

Often enough, change is voluntary. Another surprising shakeup took place earlier this week at SAP, on a Sunday no less (those industrious Germans!) Jim Hageman-Snabe announced he would exit his role as co-CEO in May 2014, apparently to step back a bit and have more time for his family.

The whole co-CEO thing is always a little strange, but McDermott and Snabe made it work, one the smooth, natty sales leader (McDermott), the other a product visionary (Snabe). McDermott and Snabe were awarded their posts in 2010 after previous CEO Leo Apotheker resigned (or was fired) after less than two years at the helm. Apotheker now holds the title as king of short runs.

Snabe is credited by SAP with the development of its flagship ERP product and dozens of industry-specific software solutions. In other words, he pretty much created the blueprint for the majority of SAP’s software.

I’ve met and interviewed both McDermott and Snabe, likeable men with a sense of humor and a wicked competitive streak. I once asked Snabe about Larry Ellison’s statement that SAP would have nothing in the cloud until 2020, to which he replied: “Maybe it was my parents who taught me never to lie.” On SAP’s ongoing legal battles with Oracle, Snabe said: “If I had a choice, I would go for the best engineers for software development, not the best lawyers.”

Initially there seemed to be an undertone of a shift toward a more U.S.-centric SAP, not just with McDermott’s strengthened leadership role (he is based in SAP’s North American headquarters in Newtown Square, PA), but the appointment of Vishal Sikka to the company’s global managing board last April. Sikka is based in Silicon Valley, and many industry watchers consider him the natural partner to McDermott. In response to questions about such a shift, McDermott told me that SAP is a global company, not just a German one or a Silicon Valley one.

Snabe’s departure follows a few other notable ones, including Sanjay Poonen, who led SAP’s mobile division, and will leave the company at the end of July; and Lars Dalgaard, who led SAP’s critical push into the cloud (Dalgaard was the CEO of SuccessFactors, a cloud-based human capital management software company that SAP acquired for $3.4 billion in 2011). But SAP’s McDermott told me last week that Dalgaard is still part of SAP as a strategic advisor. “He still has his office,” McDermott said. “We didn’t take anything away from him.”

McDermott added that SAP has plenty of “bench strength,” including Bob Calderoni, the former CEO of Ariba (acquired by SAP for $4.3 billion last year), and now in charge of SAP’s cloud business unit. “He’s the only CEO I know of who brought an on-premises model to the cloud,” McDermott said, implying that Calderoni can do more of the same for SAP.

That brings us to VMWare. Where to begin? (It might be easier to just list who’s still left!) CMO Rick Jackson left for Rackspace. Head of north American sales, Mike Clayville, left for Amazon. Tod Nielsen, who headed up Cloud Foundry, VMWare’s platform-as-a-service offering (PaaS), left to run Heroku,’s PaaS. The company’s cloud guru, Bogomil Balkansky also left, presumably pulled away for another stealth startup via Diane Greene, a VMWare founder, who was fired as VWMare CEO years ago, but who has also backed companies like Nicera, which VMWare purchased a year ago for $1.26 billion, CloudPhysics and Cumulus (if you haven’t guessed from the names, those are also cloud companies).

This is a tricky time for VMWare. It has largely dominated the virtualization and private cloud space, despite formidable competition from Microsoft, Red Hat, Citrix and others. But now it is venturing into hybrid cloud territory with its vCloud Hybrid Service, which will allow VMWare customers to move workloads from their own data centers into VMWare’s public cloud. The idea is to leverage the familiarity enterprise IT managers have with its technology, a strategy also being pursued by Amazon (via Eucalyptus), HP, and Rackspace, for instance.

Expectations for VMWare remain high, and many industry watchers believed that VMWare hasn’t been growing fast enough. Yet despite all of the departures, the risky new ventures, the spin-off of Pivotal and the sell-off of some of VMWare’s social business software plays, the company reported strong Q2 earnings — growth above analyst expectations. As Wells Fargo senior analyst Jason Maynard put it: “We believe there will be a cyclical IT spending recovery in H2 2013 as key verticals like financial services and government stabilize.”

Surely there’s something more behind the VMWare departures, but I’m betting the company has long moved on. As VMWare heads into new territory, competitors will derail its efforts by plucking top talent; innovators like Balkansky will get itchy to innovate again.

And yet new doors open — a new company is born that VMWare may buy, or the company brings in new leadership, like cloud provider Savvis’ President, Bill Fathers, to run Hybrid Services.

And the cycle begins again.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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