Managing Innovation from the Land of Ideas and Talent Clas Neumann • Jayaram Srinivasan Managing Innovation from the Land of Ideas and Talent The 10-Year Story of SAP Labs India 123 Clas Neumann Jayaram Srinivasan SAP Labs India Pvt. Ltd. SAP Labs India Pvt. Ltd. 138, Export Promotion Industrial Park 138, Export Promotion Industrial Park Whitefield Whitefield Bangalore 560066 Bangalore 560066 India India [email protected] [email protected] ISBN 978-3-540-89282-3 e-ISBN 978-3-540-89283-0 DOI 10.1007/978-3-540-89283-0 Springer Dordrecht Heidelberg London New York Library of Congress Control Number: 2009927283 © Springer-Verlag Berlin Heidelberg 2009 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. 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Cover design: WMXDesign GmbH, Heidelberg, Germany Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com) Würde man mich fragen, unter welchem Himmel der menschliche Geist seine auserlesensten Eigenschaften entwickelt, am tiefgründigsten über die größten Pro- bleme des Lebens nachgedacht und Lösungen für einige von ihnen gefunden hat, welche sehr wohl die Aufmerk- samkeit derer verdienen, die Plato und Kant studiert haben, so würde ich auf Indien zeigen. (If I were asked under what sky the human mind has most fully developed some of its choicest gifts, has most deeply pondered over the greatest problems of life, and has found solutions of some of them which well deserve the attention even of those who have studied Plato and Kant, I should point to India.) Max Mueller, German indologist and Sanskrit scholar Preface India has always fascinated emperors, adventurers, missionaries, scholars, hippies and travelers alike. However, only over the last ten years, it has started to attract foreign investment and the interest of multinational com- panies as a destination for sourcing and sale for goods and services. Today, nobody disputes the potential the Indian subcontinent has in our global world and the international success of its largest companies like Tata Group or ONGC. Unlike the other BRIC (Brazil, Russia, India, China) countries, which built their success either on abundance of natural resources or cheap labor, India built a large portion of its economic success on knowledge and technology. The best showcase was the rise of its IT giants, which employ hundreds of thousands of smart engineers and the Indian IT sector meanwhile is called the backbone of the global IT industry. SAP AG, the largest software company in Europe, is the undisputed world market leader in business software solutions. It did not only pioneer the way how business applications help running companies successfully and efficiently; it challenged as well the traditional way on how to distribute engineering work around the globe. By not following the trend of just off- shoring IT work at the lower end of the value chain, but integrating its In- dian development center as one of the four major development hubs it in- novated distributed research and development (R&D) processes. Today, its capability to build complete products and generate a tremendous stream of innovation out of India, serves as a role model for many other multina- tional companies. Since its foundation in 1998, SAP Labs India has expanded from a small development facility with 100 members to the biggest R&D hub of SAP AG, outside Germany, with about 4,000 employees in 2009. Its growth has become a phenomenon that still fascinates internal and external stake- holders. Today, SAP Labs India contributes to every conceivable area of product development, starting from research and breakthrough innovation VIII Preface right through to mission critical customer support. As a pioneer in distrib- uted software development, SAP Labs India has attracted many visitors, ranging from government dignitaries and global customers to professors and students. This book attempts to capture the key learning SAP has made in the first 10 years of development in India. It has its focus specifically on organiza- tional considerations, the development processes applied and on the people management across intercultural borders. The book uncovers for the first time some of the secrets on how to turn a ‘captive center’ into an innovation hub that attracts the best talents from many countries. However, it also throws some light on the challenges that SAP faced on this way and on challenges that still lay ahead. This book is not a historical description of a journey. It is a summary of the knowledge that SAP has acquired in run- ning its largest offshore lab, and it can be used for anyone who is inter- ested in the way multinational companies build and run successful research and engineering in India. It is meant for interested scholars, professionals and managers alike; specifically in the turbulent times of 2009 and 2010, it will be of great benefit to understand how SAP leverages the innovation potential of India. Creating ideas and intellectual property in India is a sus- tainable model that weathers through all the storms that might still lay in front of us. Acknowledgement During the second quarter of 2008, when we were fondly recollecting the early days of SAP Labs India, we started thinking about writing a book about its 10-year story of success and about our experiences in those years. At that time, the market was really strong, and SAP posted excellent results for the first quarter of 2008. Grand plans were made for the anniversary of the Labs. We planned to invite several internal executives, academics and speakers for the anniversary event in November, and our book was sup- posed to be released as a great surprise for everybody. Everything was set to engage the audience in an intense debate to dream about the next 10 years of the Lab, but fate had different ideas when the fi- nancial markets crashed in September 2008. They even deteriorated rap- idly in October, and 150 years old companies like Lehmann Brothers vanished into thin air. This left us wondering, if our 10 successful years Preface IX of business in India were suitable celebrating. Accordingly, in the second half of 2008, SAP pressed the brakes on all expenses, and the anniversary preparations were brought to a grinding halt. We still had our celebrations in November, but in a limited way and much smaller as planned before. Léo Apotheker, co-CEO of SAP AG, and Peter Zencke, at that time execu- tive board member and board sponsor for the Labs, participated in a small celebration and rewarded those who had been with us since the opening of our first office in 1998. Instead of launching our book, we made the an- nouncement of its publication at the beginning of 2009 because we had no sight on how things would unfold afterwards. Since then, the market has been flooded with bad news, and the economic outlook became really gloomy. It was surprising for us to see how the business environment deteriorated from the time when we started our book project in July 2008 to the time when we finished it. When the book was nearly completed, we almost felt like playing the fiddle when Rome was on fire. We went ahead with our work, because we are sure that the SAP Labs’ story of growth, passion and perseverance, still could help to moti- vate people during a big financial crisis and a bad market situation. This reminded us of the quote by Winston Churchill: “The farther back you can look, the farther forward you are likely to see.” Many people helped us complete this book, and we thank all of them for their outstanding help and support. First, we would like to thank Springer and Dr. Martina Bihn, Editorial Di- rector at Springer, for making the publication of this book possible and for constantly guiding us during our work. We thank Markus Richter, our copy editor, Mary Bhalla and Theodore Benno Schachter, our language copy editors, for their support. A lot of people inside SAP AG and SAP Labs India helped us with the re- search for this book: we thank the senior development managers Rama- krishna Yarlapati, Avaneesh Dubey, Sudhir Krishna S., Venkat Srinivas Seshasai, Srivibhavan Balaram, Uma Rani TM, Alain Lesaffre, Anita Venugopal, our HR head, our SAP Labs marketing team, Padma Dhotrekar and our colleagues of the department ‘SAP World’. In various interviews, a lot of people helped us with our research and to enrich our storyline. Without their support, the book would have definitely looked less interesting. We would like to thank Les Haymen, former head X Pre face of the Asia pacific region, Dr. Udo Urbanek, Werner Konik, Martin Prinz and Georg Kniese, former Labs India managing directors, Dr. Dietmar Saddei, Ronald Lorenz, Narasimha B.T., Suryanarayanan V., Franziska Ahl, Ramesh B.G., Bhuvaneswar Naik and Satish Venkatachaliah, former HR heads of Labs India. Eva Bonnewitz, our assistant from Germany, joined us in India and sup- ported us for the entire duration of the project.