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SAP CEO McDermott Walks a Fine Line on NSA Allegations

When German media screamed "SAP works for the NSA!" the company's American CEO pushed back, carefully.


American tech companies have come under deeper public scrutiny ever since Edward Snowden released documents suggesting U.S. spy agencies, including the National Security Agency, may have direct access to citizens’ data.

But as far as software giant SAP is concerned, that’s just not the case, according to CEO Bill McDermott.

“There are no back doors in SAP technology, period,” he told Re/code at an event in Hanover, Germany, Monday night where the CeBit technology conference was under way.

By saying there are “no backdoors,” he means there is no secret way for spies at the NSA or any other government agency to break into SAP software such as its HANA database in order to extract sensitive information from a customer such as a business or government agency.

McDermott’s unequivocal denial sounds routine to American ears, but it’s not intended for an American audience. The target of the statement was the people of SAP’s home base in here in Germany, and it forms the tip of a complicated cultural, political and historical iceberg.

A potential mini-scandal shook SAP and business media circles last week when the German broadcaster MDR aired and published an investigative report that basically tied SAP and one of its U.S.-based subsidiaries to a contract with the NSA. Its new HANA database was said to be especially good at processing large sets of metadata that the intelligence community like to mine for useful nuggets that occasionally help them catch or kill bad guys.

A second report by the German news site Zeit Online, bearing the headline “SAP is Working for the N.S.A.” went a little deeper, alleging that over the years the German outfit pursued a deliberate strategy to acquire companies that did business with American intelligence agencies — buying companies like SyBase in 2010 and Inxight in 2007 — specifically because the targets did business with the intelligence community.

Allegations of collusion between SAP and the NSA in a surveillance scheme would be if nothing else politically sensitive in Germany and doubly so given that McDermott is the first American to run the company, but who now calls Germany his home and is less than a year into his tenure.

After a few years as co-CEO with the Danish-born Jim Hagemann-Snabe who retired in 2014, McDermott won a complicated political battle to land the job as SAP’s sole CEO.

As Germany’s primary stake in the global tech economy, the 43-year old SAP carries a lot of cultural weight as an unofficial national institution. It’s Germany’s Microsoft and IBM combined, and its 71-year-old founder, Hasso Plattner, is Germany’s answer to Bill Gates, worth nearly $10 billion, making him the country’s eighth richest person and the 125th richest in the world, according to Bloomberg. For SAP to be somehow in league with the detested American NSA would be an ugly stain on its local reputation.

Here’s why: In Germany the political and cultural sensitivities surrounding government surveillance run especially deep. Germany was ground zero for the Cold War. Before the reunification in 1990, people living in Communist East Germany lived in a society in which it was common to be pressured by the Stasi secret police to spy and inform on friends, neighbors and family members.

The notion that benign personal information in the wrong hands might be turned against you is deeply felt across the German political spectrum, and that’s one of the reasons the country has some of the toughest laws on data sovereignty and personal privacy in the world.

The revelations by Snowden, a former NSA contractor, about that agency’s activities have been eagerly followed here, and a talk by Snowden is on the bill for CeBit later this week. When the Snowden leaks were new they were thought to be good for SAP’s business because of perceptions that a German company it would be less likely to collaborate with the NSA.

Adding further to the political-cultural mix was a 2013 story — based on NSA leaks from someone other than Snowden — claiming that the NSA tapped the cellphone of German Chancellor Angela Merkel, which still very much annoys Germans. The country’s top prosecutor determined that was not true but the allegations are still widely believed.

Sensing a political blowup, SAP issued a statement attributed to McDermott late on Friday after markets had closed in New York. The stories were “flawed” and “misleading,” he said. And while he didn’t acknowledge that American intelligence agencies are among SAP’s customers, he didn’t say they aren’t either.

The statement went further to say that if the NSA were a customer of SAP, it wouldn’t be SAP’s business to disclose that fact. Nor would it be up to SAP to tell any customer — even the NSA — what it could or could not do with the software it had just paid for. Most importantly, it didn’t say the NSA isn’t a customer.

Monday night at the SAP dinner party — held at a trendy Hanover bistro called Funky Kitchen — McDermott reiterated the sentiment in a short interview with Re/code. “It would make no sense in the free market to sell someone some software and then to try and dictate what they can or can’t do with it,” he said. “The stories were wrong. But because of all the sensitivities in Germany we decided to respond strongly. I guess you could say we used a sledgehammer on the head of an ant.”

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