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Why European software leaders need patience and persistence to win

By Léo Apotheker,

Former CEO SAP & HP

Chair of multiple European Software Companies

Boardwave Patron

Earlier this month, we launched Boardwave in The Netherlands with a fantastic Boardwave Debate @Dinner in Amsterdam. The highlight of the evening was an inspirational speech given by Boardwave Patron and former SAP CEO, Léo Apotheker. He drew from his personal success story - namely how he took one of the few European-headquartered software businesses global. Léo spent more than 20 years at the German software giant, he held the role of Chief Executive Officer from 2007 through 2010. From 2010 to 2011, he served as Chief Executive Officer and President of Hewlett-Packard Inc. He currently, sits on the boards of a number of leading European technology companies and is a Boardwave Patron.

SAP remains one of the world's largest software companies today, with TTM (trailing twelve months) revenue of $32.5bn and a market value of $137bn. That makes it the worlds 7th most valuable software business. He shared his thoughts on how other European software CEOs and Founders can overcome the challenges we’re facing today, to become global leaders in their space.

Leo’s speech perfectly encapsulates the need for the right support and connections in the European software industry and why we’re all part of Boardwave. We’re lucky enough to share it here for anyone who couldn’t make it to Amsterdam:

Leo Apotheker, Boardwave Launch Event, Amsterdam, February 2023

"It is unfortunately true that the European software industry, taken broadly as one category, is still lagging behind Silicon Valley, or indeed behind other parts of the world in terms of revenue or value creation growth – even though the latter seems to be undergoing some adjustments over the last year or so.

We are coming from behind, but on a slightly more optimistic note, we are collectively doing a little better than, say, 20 years ago when my friend Adam Hale and I wrote a short paper about the state of the European software industry, yet we are still not where we should and deserve to be - in fact, we’re far from it, particularly in light of Europe’s economic wealth. So, what, if anything, is holding us back? Or are we simply incapable of producing world-leading software companies?

Let’s start by looking at some of the elements that make a software company successful.

Let’s look at the context and the external environment first:

  • Obviously, to have thriving software companies, one needs a solid and broad infrastructure and regulatory framework, including labour regulations, taxation, immigration and freedom of movement… and in order for me stay out of trouble on these particular hot buttons, let me just say that there is room for progress, and a lot of work left to do, in particular when it comes to immigration! Yet while we are certainly much worse off than our friends in the Valley, the picture becomes a little more nuanced when we compare ourselves to other regions, such as for example our Israeli peers.

  • Then of course, one needs access to capital. Over the last 10-15 years, the financing situation for the software industry in Europe has improved dramatically. There is financing available, perhaps not enough, but still much more than ever before, over the entire life cycle of a software company, from early stage to very late stage – except for one crucial element, to which I will come back later.

  • We have a lack of talent in Europe, even though we have excellent universities producing equally excellent graduates. We don’t attract enough young people to science and engineering, we need to promote mathematics and sciences much more also in elementary school and in particular with girls and young women, and yes, we can, should and indeed must do much more to promote diversity within the software industry and break the various glass ceilings that continue to exist. I would, however, also argue that specifically when it comes to the engineering cohorts, we are blessed by a more stable employment culture at relatively reasonable cost levels.

So much for the context and environment – a ‘can-do-better’ report card would probably qualify it best – so let’s look at the core of the issues.

Crucially, when examining the core reasons for success of great software companies, allow me to state the obvious: one needs a great product or even better, a great set of products to be successful. In the B2B world, which I know well, this translates into a product that is a ‘painkiller’, a must-have product that improves the outcome for the customer in a visible and durable way, and not a ‘vitamin’, a nice-to-have feature that might just be the flavour of the week or meet the needs of a relatively small group of customers.

Within the B2B software market, the picture doesn’t look as bad when we compare ourselves to the US or other regions. Without dwelling on SAP, which is probably still today the undisputed global leader in the Expanded ERP category, there are other segments in the B2B space where we are doing well. In particular, when it comes to industrial software, where the category has some European world leaders such as Dassault, Siemens, Hexagone, Schneider Electric (Aveva) etc., but also in other segments, such as FinTech, we have good reasons to celebrate European world champions.

My conclusion from these successes, and modestly from my own experience, is rather simple and straightforward: when we combine great technologies with broad and deep domain expertise – such as finance in the UK, industry in Western Europe, addressing sufficiently large global TAM combined with – and this is absolutely essential – the willingness of leaders and teams to execute a global strategy patiently and persistently with the burning ambition to reach the pinnacle, not only can we win… we can even win in the home market of our competitors – the USA.

So why don’t we have many more SAPs, DASSAULT Systems and Hexagones? Are we facing barriers and hurdles that handicap us in a fundamental way?

I alluded in the beginning, when we discussed financing, that one crucial element is missing in Europe. Every single one of the global leaders in the software industry is a publicly listed company. Sadly, we in Europe don’t have the equivalent of a Nasdaq or other US exchanges that are characterised by deep, liquid markets, with a broad spectrum of technology-savvy investors, sell-side brokers and analysts that bring deep domain knowledge, not just to technology or software in general, but also to each specific sub-sector.

Not only does a thriving and sophisticated public market provide a natural exit for private investors who have helped nurture software companies to the point of being publicly listed, it is also an excellent vehicle for compensation, critical scrutiny, competitive analysis and benchmarking, as well as a fantastic marketing and compensation tool. We cruelly lack such a market in Europe, and a bunch of small regional (or national) subscale public markets in various European countries are definitely not the answer! It is my suspicion that the absence of such a public market is one of the reasons why European software entrepreneurs sell while still being private, and therefore miss the potential opportunity to become world leaders. We should therefore all lobby our respective regulators and push for the launch of a pan-European Nasdaq-style public market – hopefully this will happen before hell freezes over.

Finally, there are two hugely crucial and interlinked factors that we can actually address ourselves. One is objective and the other one is my friend Adam Hale’s and my empirical opinion, but both can be addressed starting right now.

Compared to two hugely successful software ecosystems, the Valley and Israel, we in Europe are spread over a vast geography, with different languages and cultures. In the Valley and in Israel, because of the proximity – not just geographic but also socioculturally – people there have a natural ecosystem in which they can evolve together. This has been institutionalised and deepened over the years by various actors and initiatives, and as a result we compete not only against individual software companies, but also against an entire ecosystem.

Such an ecosystem also fosters the ambition of enough of its participants to aspire to become the dominant leaders in their categories, so that a small but sufficient number actually succeed. Yes, it helps to have huge ambition if you want to conquer the world, and yes, we need more European leaders who have the ambition to conquer the world!

Boardwave is a brilliant initiative to overcome these two hurdles – and probably much more as the networks will spread throughout Europe: the ability to synergise among a variety of software founders, executives, investors and mentors, across sectors, degrees of maturity and generations so that we can all learn from each other and nurture and boost each other.

Boardwave Launch Event, September 2022

Boardwave has the potential to help develop the ecosystem that we need as an industry to compete better, scale faster and achieve broader success quicker. Having been in this industry since the mid 80s and at the helm of a very successful software company since the late 90s, I wish that Boardwave would have existed 20 or 30 years ago.I would have made much faster progress!"

If you were at our Netherlands launch Debate @Dinner, why not connect with your fellow attendees in the Connection Centre?

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